By Julien Ponthus

(Bloomberg) — A slowdown in the US job market will weigh on the S&P 500 (^GSPC), offsetting any positive impact from the Federal Reserve’s interest rate cuts, according to JPMorgan Chase & Co. (JPM) strategists.

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The team led by Mislav Matejka sees a less supportive environment for US shares and anticipates the Fed to reduce rates against the backdrop of weaker labor data and higher inflation driven by tariffs.

“If labour market weakens, that would drive equities more than the prospect of Fed easing,” they said in a note.

Investors will be looking at a slew of US jobs data later this week, including job openings and non-farm payrolls, for signs of economic resilience. Traders are currently pricing in at least two interest rate cuts by the end of the year and are almost evenly split on a third one.

At Morgan Stanley (MS), the strategy team led by Michael Wilson said the market is likely to rally ahead of expected interest rate cuts. The firm’s economists see the Fed reducing rates seven times in 2026, a scenario which would lift stock prices in the second half of this year.

“There are already early signs the equity market is starting to price this now,” Morgan Stanley strategists said. “Equity performance is strong during Fed cutting cycles even if this tailwind starts to get discounted ahead of time.”

—With assistance from James Hirai and Sagarika Jaisinghani.

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