Even a cooler jobs report on Friday is unlikely to stop the Federal Reserve from hiking interest rates further on March 22, warns the CEO and founder of one of the world's largest independent financial advisory, asset management and fintech organisations.
The warning from Nigel Green of deVere Group comes as domestic and global financial markets hold their breath for the monthly US jobs report published on Friday at 8:30 a.m. ET by the US Bureau of Labor Statistics.
He says: "This jobs report is being closely watched by investors around the world after January's gave analysts a massive surprise. It revealed the US economy had added more than half a million jobs, and unemployment had fallen to a level not seen in more than five decades.
"All eyes are now on the February jobs data. We expect the US to have added around 225,000 in new jobs last month and the unemployment rate to remain at a 54-year low of 3.4%.
As this represents a cooling of the labour market, will the Fed impose only a quarter-point rate hike on March 22 rather than a half-point one?
"I doubt it," says the deVere CEO. "Even a cooler jobs report on Friday is unlikely to stop the Federal Reserve hiking interest rates further later this month.
"Fed Chair Jerome Powell has been clear that officials are looking at the 'totality' of the data. A couple of milder jobs reports won't cut it for the central bank – especially following January's bumper gains. A drop of even 100,000 new jobs would not be enough to satisfy the Fed.
"We would need to have several months of weakening employment in order for the Fed to respond by taking its foot off the gas on rates.
"As such, we expect a half-point rate hike on March 22. Markets are set to tumble as a result."
Whilst inflation remains a major headwind, Nigel Green says that investors should "remain alive to other metrics" in investment decision-making.
When costs are going up, investors should increasingly be looking at a company's ability to maintain margin, he notes.
"Investors should be paying close attention to margin because it can indicate how well a company is managing costs and competing in its industry.
"It can also impact a corporation's ability to invest in growth opportunities or pay dividends to shareholders."
In a recent media note, the deVere chief said that sectors that can maintain margin, even though inflation and interest rate hikes are likely to include healthcare, luxury goods, energy and agriculture.
"A cooler February jobs report is not going to satisfy the Fed hawks, so investors must expect higher for longer rates and may need to rebalance their portfolios as a result."