Smell that? Smells like a rate cut rally.

Although tariffs showed up in the CPI data beneath the surface, the headline has been interpreted as benign, all but locking in a cut for September 🔐. The response: a rate-cut rally.

You wouldn’t see this kind of behavior unless the market was excited about a rate cut.

My Take: Dips are Buyable

Where might the 🎢 dips 🎢 come from?

At the time of writing, the CME has a 94% probability of a September cut. Clearly, there is room for rate-cut confidence— the catalyst for this rally — to take a ding. When that happens, we should expect some red in the market. So long as we can reasonably assume those “dings” will not have a lasting impact on rate-cut probabilities — or outright jeopardize the rate cut — these days can be viewed as potential buying opportunities.

True Landmine?

If Powell doubles down on his stance to hold rates steady at Jackson Hole, I expect that would be enough to poison the confidence underpinning this leg of the rally.

In summary, until Jackson Hole and until the cut (it is possible the cut receives a “sell-the-news” response), I view today as permission to buy dips. It may not make sense from a fundamental perspective, but from a technical perspective, today’s reaction appears to be a signal that the market views a rate cut as meaningful for a notable cohort of stocks.

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