Markets spent this week digesting the surprisingly poor July jobs report released last Friday and ultimately decided it wasn’t really all that bad. It turned into a “bad news is good news” situation as the weak jobs reports significantly raised the chances of an interest rate cut when the Fed meets again in September. Markets believe there is now a 91.5% chance the Fed cuts rates 0.25% next month.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
While one or two 0.25% interest rate cuts isn’t likely to have a significant effect the economy (at least not soon), it can have immediate affect on consumer and investor sentiment. If positive sentiment translates into people buying and investing more, it can increase demand for goods and services and eventually lead to more hiring.
However, the increase in demand that leads to more hiring can also put pressure on prices, increasing the risk of higher inflation. This is exactly what the Fed does not want now as inflation expectations are already rising. The Fed has a 2.0% target for inflation and the inflation rate currently sits at 2.7%. A recent Fed survey showed that 1-year inflation expectations (for July 2026) increased to 3.1% from 3.0%.
https://www.newyorkfed.org/newsevents/news/research/2025/20250807
While interest rate cuts are good news for the stock market this week, a weakening jobs market and rising prices will make the Fed’s job much harder in the months ahead.
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
Harmon Financial Advisors, Inc. is an independent, fee-based financial planning firm and an independent Registered Investment Advisor. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. and Harmon Financial Advisors, Inc. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Harmon Financial Advisors, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information in this commercial email has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Harmon Financial Advisors, Inc. and not necessarily those of RJFS or Raymond James.
There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results.
Investing involves risk and you may incur a profit or loss regardless of strategy selected. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility
Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
Investments & Wealth Institute™ (The Institute) is the owner of the certification marks “CIMA” and “Certified Investment Management Analyst.” Use of CIMA and/or Certified Investment Management Analyst signifies that the user has successfully completed The Institute’s initial and ongoing credentialing requirements for investment management professionals.
