Market Pulse: Payrolls Miss, Rate Cut Bets Accelerate

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.

---

Labour Data Dropped

Today, markets closely watched the release of the labour market data, where the whispers were that we'd see a soft number and an increase in the Unemployment Rate, which is exactly what we got.

• Unemployment Rate: Forecast 4.3%, Actual 4.3%
• Non-Farm Payrolls: Forecast 75k, Actual 22k

In terms of the number of jobs added, it's absolutely a lower print than the market expected, particularly when you then look at the revisions, which saw June's numbers be revised to a negative print. However, the Unemployment Rate has remained at 4.3%, so this won't shock or scare the FED.

Ultimately, the above is perhaps just enough for a 'Goldilocks' environment. Weak data that the FED needs to cut into to get in front of the weakness, although not too weak that it suggests that the economy is heading into a recession.

Market Reaction Since

The market is now pricing in a faster cutting cycle. This doesn't look like a 50bps cut at the September FED Meeting, but more like a 25bps cut at every Meeting this year (Sept, Oct and Dec). We can see this in the US2Y Yield, which dropped to new lows of 3.47%, down 12bps on the session.

US2Y Yield 1D Chart:

The Yield dropping significantly is the market pricing in cuts.

S&P 1D Chart:

The S&P pushed to new highs before turning lower into the session.

Nasdaq 1D Chart:

The Nasdaq didn’t reach new highs, but it did pull back during the session, the same as the S&P.

BTC 1D Chart:

BTC broke out of $112k, but the price has been dragged back below it, likely tied to Equities rejecting.

On the release of the data, the Equity and Crypto markets all moved up to session highs; however, both have given back their gains, and they're now lower on the session. This may be due to the market potentially being more worried about the weakness in the labour market data, and the possibility that the FED might be late here. The next days and weeks' price action will be important.

Cryptonary's Take:

Today's print has shaken markets, and we've seen this in the whip-sawing price action. This is the market trying to digest whether this was a 'Goldilocks' print i.e., the FED can cut rates to stimulate growth without the labour market falling off a cliff, or whether this print was weak enough that it suggests that the economy is about to go into a recession, i.e., cutting rates aggressively to try to avoid a potential recession.

One form of cuts (the former) is positive for risk assets, the second form of cuts (the latter) is negative for risk assets.

Our base case is that the FED will now cut in September, October, and December, and they'll likely deliver another 75bps of cuts (3 cuts) in 2026.

It's our view that the economy is strong enough to stave off a recession, whilst this tightening we're seeing in the labour market isn't helping the current numbers, but that FED cuts will essentially come to its rescue.

Therefore, we remain positioned but concentrated. So, that's in Majors and our meme pick AURA. For us to risk-on even further, we'd need to get more clarity on the data front, and more clarity from Chair Powell on rate cuts, i.e., a gradual cutting cycle over the next 12 months.

Next week, markets will be closely watching the inflation data. We’ll be breaking it down for you early in the week, followed by our thoughts post-release.