Mary Daly talked about how the job market has weakened a lot in the past year, especially due to the rise of artificial intelligence affecting jobs. Daly pointed out that the Federal Reserve cut interest rates to help the job market. Lower rates can encourage spending and help create jobs.

Artificial Intelligence And Its Impacts

When discussing artificial intelligence, Daly mentioned its potential impact on workers. AI advancements could change many industries and job roles. Daly stressed the importance of understanding and managing these changes. It’s crucial to prepare for the challenges AI may pose to traditional jobs. She emphasized that policymakers need to consider these factors. The goal is to stimulate the economy while also adapting to technological changes. Her comments suggest that the Federal Reserve’s recent rate cut is a reaction to the weakened job market. This indicates a shift from focusing on controlling inflation to supporting jobs. It seems we can expect the Fed to maintain a friendly approach in the months ahead.

Effects Of A Weakening Job Market

The slowdown in the job market is evident. The August 2025 jobs report added only 95,000 jobs, which was much lower than expected. The unemployment rate also rose to 4.3%, a level not seen since early 2024’s brief recession scare. These figures suggest that more rate cuts might be necessary if the job market keeps weakening. As a result, interest rate derivatives are increasing, betting on lower rates for a longer time. SOFR futures contracts for early 2026 indicate a high chance of at least two more cuts by mid-next year. Options on Treasury futures show a strong trend towards calls, suggesting higher bond prices. For options on equity indices, this creates a tricky situation. While lower rates can boost valuations, a weakening economy may harm earnings. We recommend traders consider call spreads on the S&P 500 to capture some upside as the market adjusts to this news. At the same time, buying inexpensive, out-of-the-money puts for October and November can serve as a hedge against possible negative economic surprises. These mixed signals are likely to keep market volatility high. The VIX index has been above 18, reflecting this economic uncertainty, similar to what we saw during the 2022-2023 rate hikes. We see VIX call options as a cost-effective way to protect against sharp market declines. A dovish Fed is also putting pressure on the U.S. dollar, which has stayed below the important 102 level on the DXY index. We expect this trend to continue as long as the job market is the Fed’s main concern. This makes long positions in currency derivatives for the euro and yen an attractive move against the dollar. Create your live VT Markets account and start trading now.

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