This week’s weak US jobs report has all but sealed the deal for a rate cut at the Fed’s meeting next week. Nonfarm payrolls rose by just 22,000 in August, well below expectations, and the unemployment rate ticked up to 4.3%, the highest in nearly four years. Wage growth is cooling off, and prior job numbers have been revised even lower, painting a clear picture of a slowing economy.

 

The market is now fully pricing in a 25bps rate cut in September, with a small possibility of a larger 50bps move. Looking further ahead, investors expect several more cuts by mid-2026 as the Fed shifts its focus from fighting inflation to supporting the labor market. Fed Chair Jerome Powell recently made it clear: jobs, not prices, are now the main concern.

 

So what does this mean for the markets?

Lower rates are typically good news for both stocks and bonds, as they reduce borrowing costs and support economic growth. We are already seeing positive momentum in equities, with the S&P 500 and NASDAQ up for the week. Canadian banks, as we discussed last week, are well positioned to benefit from easier monetary policy on both sides of the border.

 

One other noteworthy announcement this week was from Prime Minister Carney on five "nation-building projects" for approval. Projects are listed below and are a good start for the Canadian economy. Let's hope there's more to come!

• Phase two of LNG Canada in Kitimat, B.C., doubling its production of liquefied natural gas.
• The Darlington New Nuclear Project in Clarington, Ont., which will make small modular reactors.
• Contrecœur Terminal Container Project to expand the Port of Montreal.
• The McIlvenna Bay Foran Copper Mine Project in Saskatchewan.
• The expansion of the Red Chris Mine in northwestern B.C.

I've also included a piece from our CIBC Economics team entitled "The BoC and the Fed: Same road, different journeys".

 

As always, if you have any questions, please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan