Global equity markets climbed today as investor sentiment strengthened on renewed expectations that the Federal Reserve may soon begin cutting interest rates.
The trigger was a disappointing U.S. jobs report that revealed a sharp downward revision in payroll growth for May and June, reinforcing fears of cooling labor market conditions.
Federal funds futures now imply an 85 percent probability of a rate cut as early as September, and markets are pricing in up to 100 basis points of cuts by year‑end.
Wall Street futures pointed upward with the S&P 500, Dow Jones and Nasdaq all trading higher in pre-market activity. The rally followed losses in major indices last week, including a 1.6 percent slide in the S&P 500, as rising trade tensions and weak economic data dented confidence.
Stocks pushed back toward record territory on the back of renewed rate cut optimism, even after Fed Chair Jerome Powell declined to signal imminent easing. U.S. Treasury yields tumbled in response to the shift in sentiment, while the dollar slipped against a basket of global currencies.
Major indexes regained a positive tone as investors focused on strong earnings from technology companies and signs of economic softening. AI‑focused stocks and megacap tech firms continued to lead gains, despite mixed reactions in industrial and consumer sectors.
Analysts noted that valuations remain high, but ongoing momentum reflects confidence that robust corporate profits can withstand a high‑rate environment.
Even as markets rally, skepticism lingers. A section of market-watchers warns that relying too heavily on fading data may be risky, while inflation remains above the Fed’s 2 percent target.
Voting Fed governors have expressed openness to rate cuts, but the majority remains cautious, citing geopolitical risks and uncertainty around trade policy especially as global tariff tensions persist.
Investors are now awaiting critical indicators for confirmation of a sustained shift in monetary policy trajectory. Key data including upcoming inflation prints, consumer spending indicators, and the Fed’s inflation and employment outlook will likely influence rate expectations.
Corporate earnings from major tech names such as Microsoft, Meta and Nvidia are also slated to drive sentiment heading into the third quarter.
In a broader context, markets are now in a Cautious Optimism mode: while economic growth appears moderate, rate expectations have tilted dovish. Investors are betting that the Fed will transition to cuts gradually, which has cheered equity valuations and pushed storied indexes higher.
This optimism could sustain gains if corporate earnings remain strong and incoming data affirms slowing inflation and labor headwinds especially with trade policy developments providing added clarity.
Written By Ian Maleve
