24.09.25 - Markets ignore Fed message
Federal Reserve Chair Jerome Powell said Tuesday that weakness in the labor market is now outweighing concerns about stubborn inflation, leading to last week’s decision to cut the Fed’s key interest rate. Powell noted that recent job growth has slowed sharply, averaging only around 25,000 per month over the past three months. “The downside risks to employment have risen,” he warned.
Powell further emphasized that equity valuations appear “fairly highly valued” and stressed there are no guarantees for lower interest rates going forward — policy decisions will remain data-dependent.
The next key releases are due this week: jobless claims on Thursday and the Fed’s preferred inflation gauge, the PCE price index on Friday. Both could significantly influence expectations for further easing.
Markets: US markets take a pause
US equities: the rally seems to take a pause
Gold is holding firm below latest record highs
Bond yields tending sideways
Crypto prices advance slightly
My View: Markets are, once again, choosing to focus on liquidity and rate cuts while overlooking the Fed’s explicit warnings. Powell’s remarks highlight a delicate balance: inflation has not been fully defeated, while the labor market is deteriorating more rapidly than many expected. This could still lead into a stagflation scenario.
By stressing both the weak job market and no guarantees on rates, Powell is signaling that investors may be too complacent. The divergence, between Fed caution and market exuberance, creates a fragile setup. Short-term momentum may still carry equities higher, but valuations are stretched and policy risks are rising. The next 48 hours could be decisive: fresh jobless claims and PCE inflation could either validate the optimism or serve as a wake-up call.
Become a member to access more valuable market updates like this
