Bulls are rallying! Job market has weakened, Inflation has fallen, Powell turns dovish, and much more!🔻🔻

Hello Readers,

Did you hear?

US inflation has declined!

With the US Fed continuing its battle against inflation, the inflation rate has declined once again! Following a 0.1% decline in June, annual inflation declined to 2.9% in July, making it the first instance where inflation fell below 3% since March 2021! Energy and food prices grew marginally while shelter and transportation costs spiked the most. However, the declining inflation rate is favourable for traders as they eagerly await the Fed to trim rates.

US job market has weakened!

Another big jolt to the US was the weakening job market. A weak job market is on account of the high interest rates as the job growth has been slowing significantly in recent months. The Bureau of Labour Statistics recently revised its annual job statistics wherein it decreased the number of jobs added by a record 818,000! This is the largest revision by the organization in several years as it cemented calls for rate cuts.

Powell has spoken!

Fed Chair Jerome Powell has announced that the Fed will begin rate cuts! He highlighted the softening job market and the cooling inflation as he announced the Fed’s intentions to begin trimming interest rates, which are currently at a multi-decadal high! He stated that the Fed did not intend to worsen the job market’s conditions as rate cuts would be announced depending on the outlook, data, and balance of risks. But that’s not the end of it!

High chances of rate cuts in September or November!

Supporting Fed Chair Powell’s statements, Atlanta Fed president Raphael Bostic stated that a rate cut was possible as early as September or November! He announced that inflation fell faster than he anticipated as pulling back rate cuts would be the “appropriate” move. With the Fed’s FOMC meeting set for mid-September, market participants are expecting it to announce a 25 bps rate cut after the meeting! How did the markets react to the developments?

Bulls ran amok after the announcement!

After months of denying the need for rate cuts, Powell finally agreed to it and the markets rejoiced. Bulls ran rampant across all major markets as Wall Street had a field day. All 3 indices soared over 1% as buying spiked sharply and the indices are close to another lifetime high. Moreover, prices of other assets like gold, silver, and oil also grew while Bitcoin gained the most, surging over 6% in a few hours! Massive rally on the markets!

Do you know what this means??

With the US Fed, also called the most powerful financial institution globally, easing monetary policy, investors will choose to withdraw their money from safer assets, borrow at lower rates, and invest money in riskier assets to earn higher returns!

Coupled with the improving macroeconomic conditions, this will lead to greater dealmaking activities, thus resulting in a direct increase in investment banking activities!

Mergers and Acquisitions, IPOs, Asset Management, Brokerage, and Wealth Management: all fundamental activities of an investment bank will gain traction as greater money begins to flow through the financial markets. Moreover, you are at a greater advantage as an Indian!

Giant investment banks like Barclays and Citigroup are planning massive hiring drives across India as the country’s economic potential combined with cheap labour is a great place to do business!

Moreover, a recent report by Bloomberg Intelligence showed that finance professionals in India are set to make more money than those in Singapore and Hong Kong! Indian finance professionals’ salaries could rise by a whopping 10%, higher than the duo’s 4%, due to India’s booming economy, which is also a great contributor to deal-making, investment banking, and overall wealth-generation opportunities!!

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