Soft Landing or Slowdown? Reading Jobs, Inflation, and the Fed - 9/8/25

In this episode of Paramount Wealth Perspectives, host Chris Coyle and Chief Investment Officer Scott Tremlett break down the latest market developments as investors weigh weaker U.S. payroll data against sticky inflation and Fed policy uncertainty. With September rate cuts on the horizon, Scott shares his take on the risks of moving too aggressively versus waiting too long, and what that means for Fed credibility.

The conversation also explores signals from the bond market, sector rotations driven by rate expectations, and the resilience of the housing market amid elevated mortgage rates. Globally, political shifts in Japan, France, and Argentina add to fiscal risks and currency volatility, while commodities and oil remain caught between demand softness and supply adjustments.

Scott also discusses whether equity leadership is broadening beyond mega-cap tech, how AI is reshaping enterprise spending, and what investors should watch in upcoming inflation reports and earnings season. The key takeaway: balance, diversification, and discipline remain essential as markets navigate slower growth, policy shifts, and global uncertainty.

Transcript

Chris Coyle: 0:00

Intro song

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Hello everyone. Welcome to Paramount Wealth Perspectives, your go-to podcast for the latest updates on global markets and current economic events. This is your host, Chris Coyle. I'm the marketing director and a financial advisor here at Paramount Associates Wealth Management. And today I'm joined by Scott Tremlett, chief Investment Officer here at Paramount Associates Wealth Management. Let's start with recent market performance. The s and p 500 gained 0.3% last week, closing around 64, 80 up 10% year to date. Scott, what stood out most in the data? Thanks, Chris. What stood out most to me was the labor market. Payrolls grew by just 22,000 in August. Far below expectations prior months were revised down, leaving us with a net loss of 21,000 jobs. The unemployment rate rose to 4.3%, although participation rates did nudge higher. We are not seeing mass layoffs, but hiring is clearly. Slowly. It's worth mentioning that the ratio of job openings to unemployed workers fell below one for the first time since 2021. A sign that the labor demand is softening, add higher jobless claims and weaker a DP payroll growth and is clear. Momentum is fading. Switching to talk about the fed markets are convinced rate cuts are coming in September. How do you see it? Markets expect at least a 25 basis point cut with growing. Odds of 50 futures imply over one point a half percent of easing through late 2026, but the Fed isn't just following markets, inflation, especially in services. Remain sticky. Chicago Fed President Austin Goolsby has said he wants to see the August CPI before making a September call. That number is coming Thursday. This is certainly a balancing act. Weak labor data says cut, but tariffs and fiscal policy are still pushing inflation higher. My view is the Fed takes the smaller step this month so they retain more flexibility for future decisions. And beyond September, what risks do you see in fed policy? Several risks. First, the risk of cutting too aggressively and reigniting inflation that would hurt their credibility, which was already challenged during the 20 21, 20 22 inflation surge. Second structural changes in the labor market. Lower immigration means we need fewer new jobs to hold unemployment steady. That makes the August payroll miss less alarming than headlines suggest. Third, politics with Fed leadership set the change in 2026. Some investors are betting on a more dubbish regime if that's driving market expectations. It could misalign with current policy makers. Finally, the Fed's own forecasts already assumed rising unemployment and a 3% inflation. By year end, so in their view, we're still on track. That makes a rapid fire cutting cycle less likely than markets expect. Bond markets are as sending signals too. Treasury yields and credit spreads shifted last week. How do you interpret that? First for our listeners, when bond spreads get wider, it means investors are more worried and want extra return for taking risks. When they tighten, it shows confidences up and investors are more comfortable lending at a lower extra cost. Back to your question, Chris yields on treasuries move lower after the weak payrolls data, but spreads on high yield and investment grade bonds tightened. That suggests investors expect easier fed policy, but they're not panicking about credit risks. In fact, demand for yield remains strong. To me that shows markets are pricing in a soft landing scenario, slower growth, but not a recession. Instead, we're seeing confidence in corporate balance sheets, even with policy uncertainty that leads to inflation itself. We've seen mixed signals in the data. What's your read on the trend? Inflation has definitely cooled from its 22 highs, but it's far from defeated. Good prices have leveled off, but services remain stubbornly high. Things like housing, medical care, and insurance are sticky. Tariffs are another wild card. Adding cost pressures that work against Disinflation, the Fed's challenge. Is that even if headline CPI comes down, underlying drivers could flare up again. That's why policymakers remain cautious about declaring victory. Now let's turn to sectors. Communication services rose over 5% led by alphabet's, 10% gain after a court ruling. Home builders also rallied while energy and financials dropped. What explains this split? It is rate sensitivity versus commodities and weak jobs data. Lower rate expectations boosted both tech and housing while weaker oil prices dragged on energy. Financials face headwinds from the weak jobs. Data financials typically benefit from rising yields and economic stability. Investors seem to be rotating capital into sectors that benefit from easing policy and away from those tied to global demand swings. Speaking of housing, mortgage rates are still high compared to pre pandemic levels. How do you see that affecting the housing market going forward? Housing has been remarkably resilient. Demand hasn't collapsed because supply is tight, but affordability is stretched. If the Fed follows through with rate cuts, mortgage rates could ease further, which would support the builders. Still structural issues remain lack of inventory, rising construction costs and demographic ships. So while rate cuts provide short-term relief, housing affordability is likely to stay a challenge. A broad politics stirred things up. Japan's leaders stepped down France facing a confidence vote and Argentina's election outcome. How do these filter into markets? They all raise fiscal risk. France's 30 year yield hit the highest level since 2011, even above Spain and Greece. In Japan, the yen weakened on expectations of looser fiscal policy limiting the bank of Japan's tightening. And Argentina's losses add stress to emerging markets together. They're pushing. Global Bond yields higher and amplifying volatility across the currencies. Oil prices dropped last week, but OPEC Plus is signaling production changes. Where do you see commodities heading? Oil is really caught between two forces right now on one side. Slower global growth is pressuring demand, and the other OPEC plus is trying to manage the supply. Longer term geopolitical risks from the Middle East to Russia add volatility. For investors, it means oil and energy stocks will stay choppy with sharp swings up and down. Gold, meanwhile has been strong as a hedge against uncertainty reflecting how investors are positioning defensively. Equity markets have been led by big tech. Do you see leadership broadening out? Yes. We have seen trading days with broadening and, and that is known to be healthy. Small cap stocks and cyclicals have had their days in the sun, but I'm not a true believer. There is a significant difference in earnings growth between the Mag seven and the other. 493 stocks of the s and p 500. Broadening suggest investors are positioning for rate cuts to benefit from broader economy, not just a handful of mega cap names on paper. If breath continues to improve, it would make this rally more durable. The risk, of course, is that if the economy weakens too much, small caps and cyclicals could suffer. And in today's economy, sustainable earnings growth, sustainable revenues make a stock more defensive. That doesn't mean less volatility in the short run, but over a longer period earnings and growth. Both do matter. I'm not saying put all your eggs in the mag seven basket. I'm saying that the old school term broadening may not hold as much weight these days. There are many mid cap and other large cap companies that share characteristics with the mega cap growth earnings characteristics. You just have to find them. Stepping back, how would you describe investor sentiment right now? It's cautious optimism. On the one hand, stocks have been resilient up double digits, year to date. On the other, there's recognition that the cycle is maturing. Investors are hedging more rotating and pricing in significant fed cuts. Sentiment isn't euphoric. But it's not fearful either. It's a market waiting for clarity on inflation policy and global politics. That limbo explains why moves are sharp when the new data hits. Corporate earning season is picking up again, what are you watching Most closely tech earnings will be front and center this week. Companies like Oracle and Adobe give us a window into enterprise spending on AI and cloud computing. So far, the narrative has been strong demand. For AI infrastructure, but the question is whether that translates into broad revenue growth or just concentrated gains in just a few names beyond tech. I'm watching consumer oriented companies, retailers, travel and autos for signals about how households are holding up with the higher rate environment. Earnings will either confirm or challenge the idea. That the economy is just slowing, not slipping into a recession. Given this mix of US and global risks, how should investors position themselves? Definitely diversify strategically within US equities, there will be sector winners, especially in everything ai. I am a big believer in the private markets right now. Credit infrastructure and equity are all compelling diversifiers in my mind, and international equities. Don't forget about them. They do look stronger than they have in decades. With healthier growth and cheaper valuations, US bonds finally provide yield and downside protection if growth weakens further. The era of just buying an index is definitely fading and active management matters. Again, before we wrap up, what should Investors watch this week? The August inflation numbers are key producer on Wednesday and consumer on Thursday. A softer number would cement expectations for a September cut. Again, Oracle and Adobe earnings will be important for Gage and enterprise AI and software spending and global politics. From France's government turmoil to Japan's leadership vacuum will keep investors cautious. Scott, let me give you the final word. What's your big takeaway for investors listening today? For investors, the key is balance. The US economy is slowing but not stalling. The fed is leaning towards easing, but inflation risks limit how far they can go. Markets will stay volatile as data shifts week to week for investors, that means staying diversified, leaning into high quality assets and keeping a long-term focus. Chasing headlines is tempting, but discipline will matter most in the months ahead. Well, thank you, Scott, for taking the time to share your thoughts. Thank you to our audience for tuning in. And remember to please submit your questions via email to general@paramountassoc.com. For now, stay informed. Stay ahead and join us next time for more key updates shaping the global economy.