Market Faces Crucial Week: Fed Decision, Jobs Data, and Tariff Deadline Loom
The stock market’s impressive rally faces a notable test in the coming week, with a trifecta of high-stakes events poised to shape its trajectory. investors are closely watching the Federal Reserve’s interest rate decision, the release of the July jobs report, and a critical deadline for president Donald Trump‘s tariffs.
Prediction platforms like Kalshi and Polymarket are offering a unique glimpse into market sentiment,reflecting how traders and strategists are anticipating these pivotal moments. These markets, which gained prominence during the 2024 presidential election cycle, serve as barometers for consensus views on significant events.
The S&P 500 has surged over 30% from its April low, achieving consecutive record highs this week.This robust performance has been fueled by optimism surrounding resilient economic growth and strong corporate profits, even amidst escalating trade tensions. However, the upcoming week introduces a layer of uncertainty that could potentially disrupt the current bull run.
Federal Reserve Meeting: A Potential for Dissent
The Federal Reserve’s upcoming meeting is a focal point, with prediction markets assigning a near-zero probability of a rate cut. Though, there’s an anticipation of internal debate, with kalshi pricing in an 82% chance of a dissenting vote against a no-cut decision. Notably,Fed Governors Michelle Bowman and christopher Waller have indicated a willingness to consider a July rate cut if inflation remains subdued,suggesting they could be the dissenting voices.
Fed Chair Jerome Powell and his colleagues have been cautious about lowering rates, awaiting clarity on the impact of Trump’s tariffs on inflation. Powell has also emphasized the economy’s strength, suggesting it can withstand higher rates as data evolves. Powell’s press conference following the decision is expected to address recent discussions with President Trump regarding the Fed’s building renovations, and traders are even placing bets on specific words he might use, such as “credit,” “projection,” and “median.”
Jobs Report: Gauging Labor Market Resilience
the July jobs report, due next Friday, will provide a fresh assessment of the labor market’s health, which has shown remarkable resilience against the backdrop of Trump’s tariffs. Kalshi traders anticipate a solid jobs report, with a 79% probability of nonfarm payrolls exceeding 100,000, but only an 18% chance of surpassing 150,000. The unemployment rate is projected to have a 55% likelihood of being above 4.1%.
For context, economists polled by FactSet forecast that the U.S. economy added 115,000 jobs in July, a slight decrease from June’s 147,000. The unemployment rate is expected to tick up to 4.2% from 4.1%.August 1 Tariff Deadline: Trade Deal Uncertainty
The world is bracing for potential trade volatility as the August 1 tariff deadline approaches. President Trump expressed a 50-50 chance of reaching a trade agreement with the European Union. European Commission President Ursula von der Leyen announced a meeting with Trump in Scotland to discuss trade, while the EU is reportedly preparing countermeasures for a no-deal scenario. The prediction market currently assigns a 53% likelihood of a trade deal being reached.
