Analyst: September Rate Cut Almost a Done Deal, Options Traders Expect Stock Market to Trade Sideways

BlockBeats News, September 7th, as the Fed's September rate cut has almost become a certainty, options traders widely expect the stock market to remain calm on Thursday ahead of the CPI data release. However, if the data shows an increase in inflation, this bet may carry hidden risks. The market's logic for expecting a rate cut is very simple: U.S. job growth has stalled, and the economy needs stimulus. Friday's weak employment data further reinforced this expectation, prompting investors to fully digest the expectation of a 25 basis point rate cut by the Fed next week. The market's reaction to this was muted: U.S. stocks posted a slight decline on Friday, the fear index edged up slightly but remained well below the key 20 level, mostly staying below this level since June.

Looking ahead, options traders are betting that the S&P 500 Index will experience around a 0.7% two-way swing after the CPI is announced on Thursday, lower than the average actual volatility of 1% over the past year. However, this trading logic overlooks a significant risk: what if the inflation data significantly exceeds expectations? "The current balance is very delicate," said Eric Teal, Chief Investment Officer at Comerica Wealth Management, "Any very positive or very negative data could change the market outlook."