Jefferies’ analyst Christopher Wood said in a note that the latest reading of the US jobs data is an unambiguous evidence of a weakening in the US labour market at a time when inflation is still above the Federal Reserve’s 2% target.

In his latest Greed & Fear note, Wood referred to the June jobs data, and said the moment he was waiting for – which seemed like an eternity – finally arrived.

“The reaction of the money markets shows that investors share Greed & Fear’s long-standing view that the Fed, in the event of such an outcome, will prioritise the labour market over inflation,” said Chris Wood.

India appears to be far more resilient to the emerging turmoil, according to Chris Wood. “It is worth focusing henceforth on the market action in emerging market ex-China stocks,” said Wood, adding, “We believe recent market action makes it crystal clear, if such clarification were needed, that the Indian stock market is much more resilient in the face of a US downturn and related Wall Street sell-off than the likes of Japan.”

This is primarily because India’s ongoing stock market rally has been driven by domestic money, unlike the case in Japan. Chris Wood’s note said he is thankful that around 26% of his GREED & fear global long-only portfolio is invested in India.

Notably, the data on August 3 showed that the US economy added just 114,000 jobs in July, a steep fall from June and far below what was being anticipated, while the unemployment rate rose to the highest level since October 2021 at 4.3%.

The trend may have heightened worries that the US labour market is deteriorating, and potentially vulnerable to a recession.

The money market is now discounting 116 bps of easing by the end of this year, whereas before the June payrolls data this figure was only 86 bps. The bet on an intra-meeting cut – first such since March 2020 – now looks likely, said the Jefferies note.

The risk of a US economic downturn has now risen materially, the note added, with the small caps gauge – Russell 2000 index – appearing more vulnerable to a downturn than the AI infrastructure stocks, it added.

Therefore, interest rate cuts are not necessarily positive for US equities, GREED and fear note said, adding that the rate cuts are more positive for Asian and emerging stock markets, whose central banks will have much more room to ease domestically, if the US Fed is lower the benchmark rate and the US dollar is weakening.