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This is The Probability Desk, from Universal Asset Owners. Today: whether the Federal Reserve cuts rates at all this year — and what the answer reprices for long-horizon capital.
This morning's jobs report printed strength the market wasn't positioned for — one hundred seventy-two thousand jobs against an eighty-thousand consensus. With core inflation still at three-point-three percent, it just removed the Fed's excuse to cut.
Our question is sharp and resolvable: does this Fed deliver zero cuts in 2026, holding the range through year-end, with inflation still sticky?
The Desk weights the base case — a Sticky Plateau, holding all year — at fifty percent. Immaculate easing at twenty-five. A stagflation tail at fifteen. And a hard landing at ten. Net it out: no cut in 2026, about sixty percent.
Fifty thousand simulated paths put zero-cut odds at fifty-nine percent and median year-end inflation at two-point-nine. Notably, the model's recession tail runs at nineteen percent — nearly double what we published. We're flagging that gap, not hiding it.
The mispricing isn't the June meeting. It's the assumption that three-and-a-half percent is a way-station back to three — when it may be the floor of a higher plateau the 60/40 portfolio isn't positioned for.
We're watching Warsh's first dot plot, the monthly inflation prints, payrolls, oil, and the credit and volatility gauges that are pricing none of this today.
The jobs market just took away the Fed's excuse to cut. The base rate, the simulation, and a sticky inflation print all point the same way: this Fed probably holds.
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Produced and edited by the UAO editorial desk. Not investment advice.