At 21:30 Beijing time tonight, the US will release its November non-farm payrolls report, which was delayed due to the government shutdown. Morgan Stanley Strategist Michael Wilson said ahead of the non-farm payrolls report release that mildly weak U.S. employment data could boost U.S. stocks, as it increases the likelihood of further interest rate cuts by the Federal Reserve .
In a report on Monday, Wilson noted that the market has now returned to a state where good economic news is bad news for the stock market, and vice versa. He explained that while a strong labor market is beneficial to the economy, it reduces the likelihood of the Federal Reserve cutting interest rates next year .
Last Wednesday, as expected, the Federal Reserve announced a 25 basis point interest rate cut, marking its third consecutive rate cut. Following the Fed's announcement, the MSCI World Markets Index reached a record high. Boosted by the AI boom and the prospect of loose monetary policy, the S&P 500 and Nasdaq have risen significantly this year. The S&P 100 index rose by approximately 16% and 20% respectively.
However, due to artificial intelligence (AI) concept stocks came under pressure, with the three major U.S. stock indexes closing lower for the second consecutive trading day on Monday.
Investors are now turning their attention to the upcoming non-farm payrolls report, hoping to find clues as to whether the Federal Reserve's loose monetary policy is nearing its end.
Economists expect the U.S. to add 50,000 nonfarm jobs in November, with the unemployment rate at 4.5%. This combination of data suggests that while the labor market is weak, it has not deteriorated rapidly.
In addition to non-farm payroll data, the US will also release several other economic data this week, including inflation and retail sales figures. This will largely fill the data gap caused by the previous government shutdown and could potentially reshape expectations for a Federal Reserve rate cut.
Although the Federal Reserve's dot plot released last week showed that policymakers expect only one 25-basis-point rate cut next year, most Wall Street investment banks maintain their previous assessment that the Fed will cut rates twice next year, totaling 50 basis points, despite disagreements on the timeline. Morgan Stanley predicts that the Fed will cut rates in January and April next year.
Meanwhile, Citigroup Strategists have recently predicted a double-digit increase in U.S. stocks next year. A team led by Scott Chronert expects the S&P 500 to rise 12% to 7,700 by the end of 2026, citing strong corporate earnings and expectations of loose monetary policy as key reasons.
"A Federal Reserve that generally supports the market is a key assumption of our investment strategy," Citi strategists wrote in a report.
(Article source: CLS)
