By Julien Ponthus

(Bloomberg) -- Moderate weakness in this week’s US job numbers could feed bullishness toward stocks by increasing the probability of further Federal Reserve interest-rate cuts, according to Morgan Stanley strategist Michael Wilson.

Investors are looking to the data for clues on whether the Fed is close to being done easing monetary policy, after three straight cuts, or if it needs to move more aggressively.

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“We are now firmly back in a good is bad/bad is good regime,” Wilson wrote in a note, explaining that a buoyant labor market, while good for the economy, would lower the probability of rate cuts going into 2026.

US economic readings this week will go a long way to filling in the data void created by the government shutdown. Delayed monthly employment numbers are due on Tuesday, with economists projecting a 50,000 increase in payrolls and a 4.5% unemployment rate, consistent with a sluggish, but not rapidly deteriorating, labor market. Consumer inflation figures follow on Thursday.

The MSCI All Country World Index — one of the broadest measures of global equity markets —  hit an all-time after the Fed cut rates on Dec. 10. The S&P 500 and the Nasdaq 100 have rallied in 2025, lifted both by enthusiasm around artificial intelligence advances and the prospect of accommodative monetary policy.

As he delivered the latest reduction in borrowing costs last week, Fed Chair Jerome Powell voiced optimism that the US economy will strengthen as the inflationary impact from tariffs fades. While officials kept their outlook for just one cut in 2026, traders have stuck to bets for two such moves.

The Fed now expects the US economy to grow by 2.3% next year, up from its previous projection of 1.8%, while anticipating that the pace of inflation will slow to 2.4%.

Meanwhile, strategists at Citigroup Inc. are the latest to predict double-digit gains for US stocks next year. The team led by Scott Chronert sees S&P 500 climbing by 12% to 7,700 points by the end of 2026, with robust earnings and expectations of easing monetary policy at the heart of the forecast.

“A generally supportive Fed is a key assumption in our playbook,” Chronert and his colleagues wrote in a note.

--With assistance from Michael Msika.

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