Odds of a Fed Rate Cut Not 100%
The word on the street last Friday was that the federal funds futures market was pricing in a 100% chance of a rate cut by September. But the price of the fed funds futures contract represents a weighted-average of all the potential outcomes in the months ahead, it is not a point forecast.
As a result, suggesting the market was 100% certain the federal funds rate would be 5% in September was a misinterpretation. The 5% federal funds rate expected was a combination of a variety of different forecasts. Some investors thought the economy was crashing and expected many rate cuts in the months ahead, while others (like First Trust) believed the economy would remain in good shape and the Fed would not cut rates at all.