Today, there are just a few items on the agenda, but the annual non-farm payrolls revision may affect the markets. In Europe, there are only minor releases scheduled, including the US NFIB Small Business Optimism Index, which is expected to be 101.0, up from the previous 100.3. During the American session, the spotlight is on the annual non-farm payrolls revision, with estimates ranging from a decrease of 600,000 to an increase of 900,000. Even though this data is old, a large change could sway market behavior.

Potential Economic Outlook Shift

The annual non-farm payrolls revision is crucial today. Although it is based on previous data, a significant adjustment could reshape our economic outlook. The market has been assuming a strong labor market, so a big downward revision would challenge that assumption. This uncertainty allows us to prepare for potential changes in the coming weeks. If the revision falls toward the high end of the negative 600k to 900k range, we should expect a shift in Federal Reserve rate expectations. Just last month, the August 2025 jobs report showed a healthy gain of 175,000 jobs. However, a significant negative adjustment to last year’s data would indicate a much weaker economy. This might lead to expectations for the first Fed rate cut moving up from mid-2026 to early 2026. Given this potential shift in narrative, market volatility appears unusually low. With the VIX index around a calm 16, an unexpected economic shock could push it to 20 or higher. We might want to consider buying options, like straddles on the S&P 500, to profit from increased price fluctuations no matter which way the market moves.

Impact on Various Sectors

In August 2023, we experienced a smaller but similar situation when job growth from the previous year was revised down by 306,000. Today’s expected revision is over double that amount, indicating a much larger possible market reaction. This historical context shows that while these revisions look back at past data, they can significantly impact future policy expectations. The revision will likely create clear winners and losers across sectors, presenting opportunities for pair trades using derivatives. Rate-sensitive technology and growth stocks may rise if Fed easing comes sooner, while cyclical sectors such as industrials and consumer discretionary stocks could decline amid fears of a slowdown. We can take advantage of this divergence by buying call options on the Nasdaq 100 and put options on industrial ETFs. Create your live VT Markets account and start trading now.

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