The June jobs report was stronger than expected with 224,000 new jobs added versus an expectation of 160,000 jobs. The strength of the jobs data followed lowered expectations for new job creation after a weak May report. Additionally, the bond market sold off by roughly 10 basis points (bps) on Friday as traders are now more uncertain about the size of any potential interest rate cut at the July Federal Reserve (Fed) meeting.
This week, all eyes will be on Fed Chair Powell as he delivers his semi-annual testimony before Congress. The Fed chair will likely walk a fine line between trying to emphasize the strength of the economy and laying out the case for why a rate cut is prudent given low inflation. I expect him to try and diminish expectations for a 50 bps decrease or a long easing cycle as part of his testimony. With the market at all-time highs, I also anticipate some volatility in stocks if the Fed disappoints expectations.
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