Fed May Slash Rates More Aggressively Amid Jobs Market Concerns, Says Expert: 'Our Focus Now Is Those Rate Cuts Are What You Need'

As the financial world anticipates the next moves of the Federal Reserve, Canaccord Genuity’s strategist Tony Dwyer brings a new perspective on the potential for aggressive rate cuts in response to a weakening jobs market.

What Happened: Dwyer expressed on CNBC’s “Fast Money” on Thursday that the Federal Reserve could implement more aggressive rate cuts due to a weakening jobs market and subsiding inflation, CNBC reported on Sunday.

"It's not that they're manipulating the data. The conspiracy theories go bananas with this stuff. It's really that they don't have a good collection mechanism. So, the revisions are significant and most of them have been negative now," said Dwyer.

"Our focus now is those rate cuts are what you need."

Dwyer argues that declining participation in employment surveys is distorting the jobs data from the Bureau of Labor Statistics. He anticipates significant revisions to this data, which have recently trended negatively. The next monthly jobs report is expected on Friday.

At their March meeting, Federal Reserve officials had already planned three rate cuts for this year, the first since March 2020. Dwyer believes these cuts will benefit sectors such as financials, consumer discretionary, industrials, and health care, which have shown positive performance this year.

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Dwyer also advises investors to focus on a broader range of stocks rather than just the top mega-cap companies. Dwyer predicts a more even market performance by the end of the year, moving into 2025. He notes that the “Magnificent Seven” tech giants have outperformed the broader market this year but cautions investors to seek better opportunities when the employment data worsens and rate cuts occur.

The S&P 500 recently closed at a record high and achieved its strongest first-quarter gain in five years, yet Dwyer recommends waiting for a more favorable entry point into the market.

Why It Matters: The potential for a more aggressive rate cut strategy by the Federal Reserve comes at a time when the market is already on edge. Just days before Dwyer’s comments, JPMorgan’s Chief Global Equity Strategist warned of an unexpected market shock, despite a strong first-quarter performance.

Moreover, with inflation ticking higher in February, the conversation around interest rate cuts has intensified, with many wondering if a May interest rate cut is on the horizon.

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