Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
You can access both of our platforms from a single Saxo account.
US Jobs Report: What to expect?
Saxo Strategy Team
What: US Jobs Report
When: 13:30 GMT (14:30 CET)
Expectation: NFP Aug 165k vs 114k (July) and unemployment Aug 4.2%vs 4.3% (July)
How will market likely react? If tomorrow's Nonfarm Payrolls (NFP) report comes out stronger than expected, with job growth exceeding 165k and the unemployment rate falling to or below consensus at 4.2%, it is likely to be seen as a negative for those hoping for aggressive rate cuts. The unemployment rate is a key focus because the recent uptick is what triggered the “Sahm Rule”, defined as when the unemployment rate increases 0.5%-point from the previous 12-month low, which is a sign that the economy is moving towards a recession. The market is currently leaning towards expectations of a weakening labour market, which means that a better-than-expected jobs report could reduce the probability of large rate cuts this year.
A disappointing jobs report, with growth coming significantly below 165k or the unemployment rate remaining elevated, would likely prompt the market to price in a 50bps rate cut in September with additional significant cuts expected before the year’s end. A weakening labour market would bolster the case for deeper rate cuts, potentially triggering a bond rally. At the same time, equity markets could extend their selloff amid growing growth concerns, US dollar may come under further pressure amid heightened expectations of Fed rate cuts while gold could be supported as investors turn to safe-haven assets in response to heightened economic uncertainty.
The below shows our views ahead of the Nonfarm Payroll report.
The views above are not investment recommendations but potential moves that could happen depending on the outcome of the Nonfarm Payroll report.
Why does it matter? The Nonfarm Payrolls (NFP) report has become a key event for shaping market expectations of the Fed’s policy rate, as the risks between its growth and inflation mandates have become more balanced. In May, the market was pricing in just two rate cuts this year, but recent signs of labour market softening have pushed expectations to over four cuts. With the Fed closely monitoring the labour market for further signs of weakness, Friday’s NFP data will be critical in determining the trajectory of future rate decisions.As the chart below shows, unemployment has risen to the highest since October 2021, while job growth moderates.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...