The 'Halftime' Investment Committee's post-Powell playbook

Fed's Policy Stance and Market Expectations - The market anticipates a rate cut, with odds of a September cut at 89% [15] - The Fed is perceived as giving a "dim green light" to a rate cut, though the word "may" introduces uncertainty [5][24] - The market's excitement stems from a perceived pivot away from inflation concerns towards the labor market [22] - The Fed may cut rates despite stagflation, a situation where inflation and unemployment are both high [29] Inflation and Tariffs - The Fed believes it can control inflation and prevent tariff price increases from becoming broader inflation [1] - Tariff-driven inflation is considered a "one-time event," but it creates a pricing umbrella for other producers to raise prices [19][27][28] - Some companies, like The Home Depot, Pepsi, and Walmart, are starting to talk about increasing prices [20] Labor Market Dynamics - Labor demand has softened, but labor supply has also softened due to factors like reduced immigration and deportations [12][28] - The "break-even rate" of unemployment, the level needed to keep the unemployment rate steady, is a key consideration for the Fed [9][12] - Payroll growth and inflation reports are important data points for the Fed's decision-making [9] Economic Reports and Data - September's economic data, including the jobs report, PPI, and CPI, will be consequential for the Fed's decision [2][6][17][18] - The market will adjust over time if the data leans against a rate cut [3] - The discussion needs to focus on the right level of payroll growth, considering the shrinking labor force [7][8]