The US added just 143,000 jobs in January—down from December’s 256,000—as wildfires in California and extreme winter weather disrupted hiring.
But despite this slowdown, markets are dangerously misjudging the Federal Reserve’s next move, warns Nigel Green, CEO of global financial advisory deVere Group.
“Investors betting on imminent rate cuts are in for a brutal reality check. Powell has made it crystal clear—the Fed will not be rushed, and rates will stay higher for longer.”
While hiring has cooled, wage inflation remains a key concern. Average hourly earnings rose 3.8% year-over-year in January, barely slowing from 3.9% in December.
The unemployment rate held steady at 4.1%, underscoring the resilience of the labor market despite recent disruptions. “This jobs report doesn’t give the Fed a reason to pivot,” says Green. “The slowdown is weather-related, not a sign of deep economic weakness. Wage pressures are still strong, and inflation is far from beaten.”
At its January meeting, the Federal Reserve kept rates at 4.25%-4.50% but struck a more hawkish tone, removing language that previously suggested inflation had made “progress.” Instead, the central bank warned that price pressures “remain elevated.”
Despite these clear signals, markets continue to price in 46.3 basis points of rate cuts by December, with a quarter-point reduction fully expected by July, according to LSEG data. Green warns that this is a major miscalculation.
“Some investors are ignoring reality. The Fed has no reason to cut rates while inflation remains sticky. In fact, with Trump in the White House, we could see a new wave of inflationary pressures.”
Nigel Green argues that Trump’s likely economic policies—including aggressive fiscal spending, protectionist tariffs, and potential trade wars—could make inflation an even bigger issue.
“Trump is not a deflationary force—he’s an inflationary one. His proposed tax cuts, infrastructure spending, and tariffs could push prices higher, forcing the Fed to maintain a hawkish stance well into 2025,” he says.
The disconnect between market expectations and Fed policy presents opportunities—and risks.
“The biggest mistake investors can make right now is assuming rate cuts are just around the corner,” says Green. “They’re not, we don’t believe. The Fed’s priority remains inflation, and until we see real evidence of a sustained decline, Powell will keep rates higher for longer, we expect.”
He concludes: “The Fed isn’t budging, inflation isn’t disappearing, and markets are miscalculating the risks ahead.”
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