Fed must get ‘more aggressive’ with rate cuts due to weakening jobs market, Canaccord’s chief market strategist says

The Federal Reserve is likely to cut interest rates more aggressively than previously anticipated due to a deteriorating jobs market and easing inflation.

According to market strategist Tony Dwyer, the Fed’s March plan for three rate cuts may be insufficient, and deep cuts are necessary to support the economy.

Dwyer argues that declining participation rates in employment surveys are skewing the accuracy of the Bureau of Labor Statistics’ jobs report, indicating a more severe job market situation.

He believes that rate cuts will benefit sectors such as financials, consumer discretionary, industrials, and healthcare.

While the market has performed well recently, Dwyer cautions against excessive optimism, especially in large-cap technology stocks.

He anticipates broader market performance by 2025, with a wider distribution of earnings growth beyond the “Magnificent Seven” of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.

Dwyer emphasizes that investors should watch for deteriorating employment data and the Fed’s response in terms of rate cuts as signals to enter the market.

He believes that the combination of a worsening economy and Fed action will create opportunities for savvy investors.