As the Federal Reserve’s September meeting looms ahead, Wall Street is divided on whether the Fed’s first interest rate cut will be 25 or 50 basis points. Interactive Brokers chief strategist Steve Sosnick joins Market Domination Overtime to discuss the Fed’s rate cut path ahead and how it may impact the market (^DJI,^GSPC, ^IXIC). Sosnick believes the final decision between a 25 and 50-basis-point cut will be close. He notes that employment data is "squishy" and says that while a 4.2% unemployment rate is high, it isn’t "terrible." Meanwhile, labor costs rose both in the most recent payrolls and Consumer Price Index data. "That’s not telling me that labor is falling off a cliff if people are getting paid more," Sosnick says, explaining that the situation is "not as disastrous" as some people are making it out to be. He stresses that the Fed’s dot plot is an important piece of the puzzle moving forward and is being overlooked as the debate around the size of the cut takes center stage. The dot plot will give Wall Street a clearer picture of the Fed’s economic outlook. "We’re going to find out if we actually are going to get 1% or more rate cuts for the end of ’24 and 2.5% rate cuts for the end of ’25. So that will start another round of Fed debates pretty much within microseconds of the Fed decision." Looking ahead to the end of 2024, Sosnick believes that earnings will be "crucially important," while the election won’t likely impact the market as much as some are expecting.
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