September 7, 2025

QuickTakes

MARKET CALL: Apocalypse Now?

President Donald Trump on Saturday amplified his promises to send National Guard troops and immigration agents to Chicago by posting a parody image from "Apocalypse Now" featuring a ball of flames as helicopters zoom over the nation's second-largest city. "I love the smell of deportations in the morning," Trump wrote on his social media site. "Chicago about to find out why it's called the Department of WAR." On Thursday, 475 mostly South Korean nationals were arrested at a Hyundai facility in Georgia. They will be returned to South Korea on a chartered flight.

That kind of news certainly will convince other would-be undocumented immigrants to stay in their home countries or to go back there if they are working illegally here. Also, US employers will be less likely to hire them. No wonder that the number of foreign-born workers in the labor force fell by 1.5 million from March through August down to 32.2 million (chart).

Trump's DOGE, tariff, immigration, and deportation policies are discombobulating the US labor market. They are certainly reducing the supply of foreign-born workers and causing employers to refrain from hiring them. The supply of workers may be a greater concern for the US economy than a weakening demand for labor.

Faster productivity should be the solution for this problem. For now, the financial markets are counting on another Fed Put to stimulate the economy and the demand for labor. That was certainly the bond market's reaction to Friday's surprisingly weak payroll employment data (chart). Some forecasters are now predicting that three Fed rate cuts totaling 150bps in the coming months will push the 10-year Treasury bond yield back down to 3.70%. For now, we expect that the yield will bounce back up off of 4.00%.

The DXY dollar index fell on Friday when the weak employment report raised the odds of a September 17 Fed rate cut to 100%, according to the CME FedWatch Tool. It is currently showing 90% and 10% probabilities of a 25bps or a 50bps cut. Technically, the DXY has continued to find support at the lower end of its rising channel (chart). We aren't giving up on the dollar, yet.

The S&P 500 fell slightly on Friday (chart). We believed that the growing certainty of a September 17 rate cut would propel the market to another record high. However, SuperMegaCap Nvidia weighed on the market. The biggest stock in the universe and the main driver of this bull market's AI theme has fallen 8% and cracked below its 50-day moving average in the seven trading days since posting a stellar quarter. Nvidia has been hit by rising competition from companies such as Broadcom, which reported $10 billion in orders from a new client (rumored to be OpenAI) for custom chips last Thursday.

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