Although the non-farm and inflation data of the past two weeks did not trigger extreme concerns about inflation, they have weakened the expectations of "recession" and "immediate rate cuts". According to CME data, the probability of a 25 basis point rate cut in November has risen to 84%, and the possibility of no rate cut has further decreased. Because of this, the market reaction last night was relatively flat, and market expectations did not change significantly.
From a medium-term perspective, expectations of recession and rate cuts have cooled, and the market has fallen into a period of confusion and cannot find a clear direction for the time being. The next most critical point is the market trend after the rate cut, will the recession intensify or the economy rebound? The first rate cut is certainly important, but what really determines the future economic trend is the rhythm and intensity of subsequent rate cuts.
At present, although recession concerns have temporarily subsided, inflation has slightly exceeded expectations but has not shaken expectations of a rate cut in November. The overall risk is not great, and the market has a breathing space in the short term.
However, it should be noted that the earnings season is coming, and coupled with the uncertainty of the US election, the performance of the stock market may face new tests, especially after the earnings data is released, the market will adjust future expectations based on corporate performance and decide whether the trend will further strengthen or weaken.