August 22, 2024
“A 50bps Rate Cut Would Guarantee Recession” – As markets anticipate a potential interest rate cut in September, all eyes are on Federal Reserve Chair Jerome Powell’s commentary at Jackson Hole on Friday. However, recession fears continue to linger among some investors. Macro Intelligence 2 Partners co-founder and president Julian Brigden joins Market Domination to share his market outlook.
Brigden argues that the Fed’s ability to cut rates without driving the economy into a recession is “statistically not very likely.” He points out that in the last 12 tightening cycles, there have been 8 recessions. While this isn’t “the base case,” it is priced into markets, especially in bonds. “We are at one of these sort of bizarre inflection points,” he tells Yahoo Finance. To achieve a soft landing scenario, Brigden explains, the Fed would need to balance inflation “while allowing the labor market to cool but not cool too much that you lose momentum.” However, he notes that employment is typically either rising or falling, and lately it has been losing momentum.