The latest US labor data showed a loss of 23,000 jobs, but employment was still up 316,000 year over year and unemployment fell to 4.1% from 4.5% in November 2025. Macro analyst Benjamin Cowen argues that the rate-cutting cycle is over and a 25-basis-point Fed hike is possible in September or December 2026. He sees the 10-year yield rising from about 4.7% toward 5% as the 30-year yield climbs.
Why it matters
Labor signals conflict. Initial claims remain low, layoffs are near prepandemic levels, job openings have normalized and openings per unemployed worker is back above one. Yet labor-force participation has fallen since November, helping unemployment decline as job creation weakens.
Inflation and bonds therefore carry more weight in the Fed's reaction function. Headline inflation cooled from its May 2026 high, but oil rebounded after falling into July. Europe, Australia, Japan and New Zealand have already resumed rate hikes, reinforcing the case that the global cutting cycle has turned.
Market impact
Long yields are the pressure point. The 30-year yield is rising, while the 10-year sits around 4.7% and could reach 5%, in Cowen's view. Higher yields can tighten financial conditions without a policy move as investors demand more compensation for inflation risk. History also complicates the signal: Cowen notes that stocks corrected around a 1990s hike before moving higher, so a hike would not automatically mean a recession or lasting collapse.
For stocks and Bitcoin, that is a bearish near-term setup. Cowen expects a possible 10% to 20% correction in late Q3 or early Q4, not a recession as his base case. He sees a drawdown as a possible cycle bottom for Bitcoin, making inflation and long-end yields the key signals to watch.
Frequently asked questions
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What labor-market data support a potential Fed hike?
Initial jobless claims remain low, layoffs are near prepandemic levels, job openings have normalized and openings per unemployed worker is back above one. Labor-force participation has fallen even as unemployment declined.
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Why are long-term Treasury yields central to the outlook?
The 10-year yield is around 4.7% and could move toward 5%, while the 30-year yield is rising. Higher long-end yields can tighten financial conditions even without a policy change.
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Which economies have already resumed rate hikes?
The euro area, Australia, Japan and New Zealand have already resumed rate hikes. Their moves support the view that the global cutting cycle has turned.
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What correction does Cowen expect for stocks?
Cowen expects a possible 10% to 20% stock-market correction in late Q3 or early Q4. A recession is not his base case.
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How could the correction affect Bitcoin?
Cowen views a possible drawdown as a potential cycle bottom for Bitcoin rather than a lasting collapse. Rising inflation and Treasury yields remain the key near-term signals.
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