The US economy added 22,000 jobs in August with a 4.3% unemployment rate. Markets are anticipating a 25 basis point interest rate cut next week, with some anticipating a larger reduction. Traders hope a dovish Fed will boost equities, but experts warn rate cuts may not benefit stocks in the near term.

President Trump’s immigration crackdown and an aging population have strained America’s labor supply. Yardeni Research warns that cutting rates could lead to a “melt-up” in stocks without addressing the labor shortage. Productivity is improving, but an overly stimulated economy risks a speculative rally.

Some Wall Street strategists believe the risks of rate cuts outweigh the benefits. August’s weak payrolls report indicates a negative growth signal that may impact earnings and economic growth more than rate cuts. Job losses in tariff-hit sectors highlight the strain businesses face from trade policy uncertainty.

Inflation may complicate the outlook as the Fed considers rate cuts. Thursday’s CPI will show price trends, with expectations of a 0.3% monthly increase and 3.1% yearly rise in core CPI. Any signs of renewed price pressure could impact the Fed’s easing decisions.

Market experts are divided on the effectiveness of rate cuts amid mounting growth risks. Morgan Stanley and Citi caution that a weak labor market may limit the Fed’s room to ease. However, Goldman Sachs foresees a rally in stocks supported by renewed earnings growth and a rebound in small caps.

Investors and policymakers are watching closely as the Fed prepares for potential rate cuts. With uncertainties in the labor market and inflation trends, the market remains volatile. Experts suggest a cautious approach to navigate the choppy waters ahead for equities.

Read more at Yahoo Finance.: Why a Fed rate cut might not help the stock market