20.08.25 - Risk of hawkish Fed tone

The Fed’s Beige Book will be released tonight, providing an updated snapshot of regional economic activity and inflation pressures.

Later this week, the attention is shifting toward the Jackson Hole Symposium, where Fed Chair Powell could set the tone for monetary policy into autumn.

The market is currently pricing in a rate cut of 25bps for September. Investors even start to bet on a 50bps decrease, led by political pressure, despite higher inflation figures.

Markets: US long-term yields moved higher during recent days

• US yields now trading at 4.29%

My View: Risk for market disappointment is elevated with Fed emphasizes persistence of inflation pressures and signals less willingness to ease quickly, which could push yields higher and weigh on risk assets.
With expectations of cuts already priced in, any hawkish surprise carries more downside than upside.

I stay cautious, avoiding chasing stretched equity rallies and keeping liquidity ready for opportunities.

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