Market Call: Pushing Back Against the Diehard Hard-Landers

Why did the stock market fall on Friday if July's weaker-than-expected employment report is now widely expected to force the Fed to cut the federal funds rate (FFR) five times over the next six months to avert an employment-led recession (chart)? Indeed, the market now believes that a 50bps cut might even be on the table for September.

In the past, the Fed only began to cut rates when recessions just started. That is likely to happen again now say the diehard hard-landers. We've observed that in the past, the Fed started to lower the FFR when tight monetary policy triggered a financial crisis that turned into an economy-wide credit crunch and a recession (chart). This time, there has been no credit crunch and no recession, so far.