Market's Rate-Cut Bet: No January Move, But June Could Be Game-Changer

According to Founder Securities’ latest analysis shared on January 10th, traders aren’t holding their breath for a January rate cut—and the data backs it up. Here’s what the numbers are really saying.

The Mixed Jobs Picture: Why the Fed Will Stay Patient

December’s employment report threw a curveball. New job creation slowed, and openings dropped—typically signs of weakness. But here’s the twist: the unemployment rate actually ticked down slightly, giving Federal Reserve policymakers a convenient excuse to sit tight in January. It’s the kind of ambiguous data that lets the central bank keep powder dry rather than pull the trigger on rate cuts immediately.

What’s pricing in right now? Interest rate futures are essentially betting the Fed holds steady this month. But the same markets suggest rate cuts could begin as early as June—a significant shift from the “higher for longer” mantra we’ve heard. This three-to-five month window is where traders are building their positions.

The Tariff Wildcard: A Potential Economic Reprieve

Here’s where it gets interesting. The Supreme Court may soon strike down the IEEPA tariffs as unconstitutional. If that happens, it’s not just market noise—it fundamentally changes the economic backdrop. Lower tariffs ease inflation pressures and could cut price expectations in key sectors like consumer staples and industrials, which have been squeezed by trade barriers.

This doesn’t necessarily mean rate cuts come faster, though. With tariffs potentially easing, the urgency for the Fed to cut prices on interest rates diminishes. Inflation fears recede naturally rather than through monetary tightening.

Where the Opportunities Are

For bonds: Short-term Treasuries face headwinds. The Fed isn’t cutting rates soon, tariffs are easing (reducing inflation risk), but the fiscal deficit keeps widening. The result? Treasury yields likely remain elevated.

For stocks: This is where optimism emerges. US equities will likely benefit from two forces: the AI boom continues unabated, and tariff uncertainty is finally clearing. Companies in tariff-sensitive sectors—industrials, consumer staples—should see improved margins and earnings expectations. The combination of clearer policy and AI tailwinds could be the catalyst equity markets have been waiting for.

The bottom line: expect the Fed to hold in January, but June becomes increasingly important. Until then, it’s the interplay between tariff policy and rate expectations that will drive markets—and that’s where the real trading opportunities lie.