INDIA NOT ROCKIN BUT 3 RATE CUTS WOULD BE POPPIN

Fed’s Bowman Sees Three Rate Cuts Ahead — Jobs Data Speaks Volumes

What’s Going On:

• Michelle Bowman, the Fed’s Vice Chair for Supervision, is pushing hard for three interest rate cuts in 2025. Her call comes after the July jobs report showed only 73,000 jobs added and significant downward revisions for May and June — signaling a sour turn in the labor market.

  
  

• She believes inflation is landing closer to the Fed’s 2% target once the one-off tariff effects are removed. The real risk now? Unemployment — not prices.

  
  

• Bowman and fellow governor Christopher Waller both dissented at the last Fed meeting, calling for a cut rather than holding rates steady—a rare dual dissent, the first since 1993.

  
  

Context & Broader Signals:

• Governor Mary Daly of the San Francisco Fed also signals a dovish tone, suggesting “every meeting” could be live for potential cuts if labor market weakness persists.

  
  

• Markets are responding: Odds for a September rate cut surged, and Palantir’s stock even jumped 6% after raising guidance, showing how much investor psychology can sway on Fed cues.

  
  

TL;DR Summary — What It Means for You

The Fed is increasingly leaning toward easing. As jobs weaken and inflation cools (minus one-off tariff impact), policymakers like Bowman feel cautious action now could prevent bigger economic pain later. That means rate cuts may be coming sooner than expected, potentially fueling stock gains, lowering borrowing costs, and warming up sectors like housing and tech. Yet, this isn’t unanimous—some Fed leaders still worry about inflation flaring back.

1️⃣ Bonds – The Big Rebound Play?

When the Fed cuts rates, bond prices usually rise. Here’s why:

• Existing bonds with higher interest payments become more valuable compared to new bonds with lower yields.

• This “inverse relationship” between interest rates and bond prices can mean solid gains for long-term Treasuries and high-quality corporate bonds.

Potential impact if cuts start in September:

• Treasuries: Prices could jump, especially in the 10-year+ maturities.

• Investment-grade corporate bonds: Benefit from falling yields and more attractive credit conditions.

• High-yield bonds: Could rally, but they depend more on economic stability — a recession would still be a risk.

📌 Takeaway: Rate cuts tend to be a tailwind for bond investors, but the size of the move depends on whether the cuts are small and steady or rapid and recession-driven.

2️⃣ Mortgages – A Possible Refinance Boom

Mortgage rates are tied closely to long-term Treasury yields (especially the 10-year).

• When the Fed cuts rates, Treasury yields often decline, and mortgage rates can follow.

• Lower mortgage rates mean cheaper borrowing costs for homebuyers and the potential for refinancing waves.

Potential impact if cuts start in September:

• Housing demand could tick higher — but don’t expect a full-on housing boom if home prices remain elevated and inventory stays tight.

• Homeowners who bought in the last two years at 6–7% rates might finally get a shot at refinancing into something closer to 5%.

📌 Takeaway: Good news for borrowers, but limited supply could mean rate cuts help affordability more than home sales volumes.

3️⃣ Stocks – The Double-Edged Sword

Rate cuts are often seen as bullish for stocks because:

• Cheaper borrowing costs help businesses invest and grow.

• Lower bond yields make stocks relatively more attractive.

But… the reason the Fed is cutting matters a lot:

• If the economy is slowing but not in recession, stocks may rally — especially in growth sectors like tech.

• If the Fed is cutting because the economy is in serious trouble, stocks could still fall as earnings expectations drop.

  
  

Potential impact if cuts start in September:

• Growth & tech stocks: Could lead the rally since their valuations are more sensitive to lower interest rates.

• Dividend & defensive stocks: May benefit as income-seeking investors shift from bonds to equities if yields drop quickly.

• Cyclicals: May lag if rate cuts are seen as a sign of economic trouble.

📌 Takeaway: Rate cuts are not a guaranteed stock market rocket — they’re a green light only if the market thinks growth will hold up.

The Bottom Line

If the Fed starts cutting in September:

• Bonds could rally strongly, especially longer maturities.

• Mortgages could see rates drop, sparking refinancing and some housing activity.

• Stocks could benefit — but the reaction will depend heavily on whether rate cuts are seen as a preemptive boost or a response to a downturn.

For investors, this is the kind of environment where diversification really matters — bonds for stability, stocks for growth, and cash ready to deploy if opportunities appear.

Indian Markets: Riding the Bear Roller Coaster 🎢

Indian markets just hit their

longest weekly losing streak in five years

, marking six weeks of red territory. Nifty 50 slumped ~0.95% to 24,363.3, while Sensex dropped to 79,857.79 by Friday. They’re both down nearly 5% since late June

Market Pain is Widespread

• 13 of 16 sectors ended the week lower.

• Small- and mid-caps fell sharper: –1.4% and –1.1% respectively. IT dropped 0.7%, pharma 2.8%, while financials and energy slid 1.2% and 1.4%.

What’s Driving the Sell-Off?

1. U.S. Trade Turmoil: President Trump slapped 50% tariffs on Indian exports, tanking sentiment.

2. Foreign Outflows: Investors are withdrawing money—months of selling pressure.

3. Underwhelming Earnings: Q2 earnings, especially from banks and mid-caps, disappointed and triggered more dumping.

   
   

How Serious Is the Slide?

This six-week drop is the longest stretch of losses since the COVID crash in April 2020—definitely a moment of caution for D-Street.

A Glimmer of Hope?

Some analysts see early oversold conditions, suggesting a bounce might be brewing—but the current mood remains cautious until trade or earnings clarity arrives.

TL;DR for Young Investors

• India’s markets are in a mini-bear streak—six weeks down, broad-based pain across sectors.

• Tariffs, earnings misses, and foreign withdrawals are the main culprits.

• We may be close to a bottom—but until trade talks improve or profits rebound, things are shaky.