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US Jobs Report Makes Case for No Fed Rate Cuts Until 2025: deVere

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The latest US jobs report underscores the strength of the economy, suggesting that interest rate cuts may be off the table until 2025, warns Nigel Green, CEO of deVere Group.

The economy added 272,000 jobs in May, far exceeding the expected increase of 185,000.

Green commented, “The robust labor market continues to fuel inflationary pressures, making it difficult for the Fed to consider cutting interest rates as the economy remains extremely hot.”

He added, “This data is insufficient for the cautious Fed Chair Jay Powell and his policymakers to move towards cutting rates. Inflation remains within a range, and several consecutive months of clear evidence showing a significant decrease are needed before any action is taken. This is not happening currently, and there’s no indication it will in the coming months.”

Green also noted that the Federal Reserve might avoid cutting interest rates before the US presidential election in November to steer clear of appearing politically motivated. Additionally, some believe the government could be boosting jobs and cash flow into the economy ahead of the election.

“In light of these factors, we believe there’s a significant risk that a rate cut won’t occur until 2025,” Green stated.

In an environment where higher interest rates persist, investors should consider rebalancing their portfolios to mitigate risks and seize new opportunities. Higher rates often lead to lower valuations for growth stocks, which depend heavily on future earnings. Conversely, value stocks, which trade at lower price-to-earnings ratios, can offer more stability. Companies with strong balance sheets, consistent cash flow, and the ability to pass on higher costs to consumers tend to perform better in such an environment.

Green concluded, “Evidence is mounting that inflationary pressures remain in control. The US jobs report strengthens our base case that there’s a real risk the Federal Reserve will not pivot on monetary policy until 2025.”

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