New York, September 9 (Kiran News) — Investors widely expect the Federal Reserve to cut interest rates by 25 basis points at its policy meeting next week following a weaker-than-expected August jobs report. While some traders are betting on a larger reduction, several Wall Street strategists caution that rate cuts may not deliver the stock market boost many are hoping for.
Risks of a “Melt-Up”
Ed Yardeni, president of Yardeni Research, warned that cutting rates could overstimulate the economy without fixing structural issues like America’s labor shortage, worsened by immigration curbs and an aging workforce.
“Stimulating an economy that doesn’t need stimulation won’t create more workers,” Yardeni said.
He cautioned that extra liquidity could drive a speculative “melt-up” rally, fueled by investor FOMO rather than fundamentals, increasing the risk of a sharp correction later.
Weak Jobs vs. Rate Cuts
Other strategists argue that weak employment trends may outweigh any benefits of monetary easing.
Stuart Kaiser (Citi): Called the jobs report a “negative growth signal” that could drag on earnings and economic growth more than rate cuts help equities.
Torsten Sløk (Apollo): Pointed to mounting job losses in tariff-hit sectors such as manufacturing, construction, retail, and transportation.
Meanwhile, annual payroll revisions showed a downward adjustment of 911,000 jobs, a red flag for labor market strength.
Inflation Still Elevated
Upcoming CPI data could complicate matters. Economists expect August’s core CPI to rise 0.3% month-over-month and 3.1% year-over-year, keeping inflation above the Fed’s 2% target. Any upside surprise could limit the Fed’s ability to cut more aggressively.
Market Outlook
Mike Wilson (Morgan Stanley): Warned of “choppy” markets in September and October, as the Fed may have limited room to ease. He sees any pullback as paving the way for a stronger finish to 2025 and into 2026, supported by a broad-based earnings recovery.
David Kostin (Goldman Sachs): More optimistic, forecasting the S&P 500 to reach 6,600 by year-end, assuming the economy avoids a recession. He expects small-cap stocks to rebound as interest rates fall and growth re-accelerates in 2026.
The Key Question
For investors and policymakers, the issue now is whether the Fed’s expected cuts will be deep enough to offset slowing growth — or whether weak jobs data and sticky inflation will keep equities under pressure in the months ahead.
My name is Bhupendra Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.
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