Coach Mark here. Is the Fed done with its hiking cycle? Fed speakers are out today discussing the worries about inflation. Jay Powell last week played the roll of politician and refused to commit to anything. However, markets are starting to get the sense that The Fed is done.

After soft economic data over the last couple of weeks and a mixed unemployment report today where the unemployment rate went up to 3.8% there is a growing belief that The Fed is done. Mohamad El-Erian, how I refer to as the smartest man on Wall Street, had the following to say after today’s jobs report.

“Taken at face value, The US August jobs report increases the probability that the highly data-dependent Fed will not hike again in this cycle as Job gains (including revisions) moderated (187,000 and -110,000); The unemployment rate went up to 3.8%; Labor force participation edged higher (62.8%); and Wage growth was moderate.”

It is not just in the US that market participants are getting the sense that the hiking cycle is done. Morgan Stanley stated that the rapidly weakening economy is likely to tile the European Central Bank in favor of a pause this month, with no further hikes beyond the current rate of 3.75%.

Inflation is a tricky thing and might have the last word on the matter but markets are generally accepting looking for a pause (end) at this point which have generally been favorable for equities in the last few decades.

Chart of the Day: Crude Oil (/CL)

Crude oil might have something to say about the Fed pausing. Inflation has been moderating nicely but if crude oil breaks out and makes a lofty ascent that nice moderation in inflation could also pause.

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