Market anticipation of a September rate cut from the Federal Reserve has been paused, pending insights from Chair Jerome Powell’s upcoming Jackson Hole speech. This pause comes after the initial surge in rate-sensitive assets triggered by July CPI data, but a strong July PPI report suggests this market momentum may be waning. CITIC Securities research notes that while July’s CPI rekindled expectations of rate cuts, the stronger-than-anticipated July PPI print on August 14th dampened investor sentiment and has caused markets to pause their rate-cut trade speculation.
The firm believes if Powell adopts a dovish stance during his speech, this could signal a potential move towards rate cuts in September. This outlook may trigger a renewed rally in the Russell 2000, S&P 500 Real Estate, and Nasdaq Biotech indices, echoing the market momentum seen during July 2024’s rate-cut trade.