How to Position Before the Fed Cuts Rates? Goldman Sachs Chief Strategist: My Top Pick Is It

In a "Markets" podcast episode aired on Goldman Sachs' website last Friday, Schiffrin highlighted the five-year U.S. Treasury bond during a conversation with Mike Washington, Managing Director of Goldman Sachs Equity Sales Trading. "I find the valuation of the five-year Treasury yield in the 3.75% to 4% range attractive," Schiffrin said. He added, "I also believe they have good risk-hedging characteristics if risk markets show weakness." As of Monday's close, the five-year U.S. Treasury yield was trading around 3.84%, down significantly from 4.38% at the beginning of the year.

Schiffrin stated that he prefers short-term U.S. Treasuries because he expects the Fed to ease monetary policy next month and the U.S. labor market is cooling. Data earlier this month showed that the U.S. added only 73,000 new jobs in July, below the expected 106,000. Schiffrin noted that the Fed is "highly likely" to ease policy in September, "I feel there is an extremely high probability of a 25-basis-point rate cut in September."

He also added that the likelihood of the Fed keeping rates unchanged at that time is even lower than that of a 50-basis-point cut.

Previously, a survey of 110 economists by industry institutions also showed that 61% of respondents expect the Fed to cut rates by 25 basis points at its next meeting on September 17, to between 4% and 4.25%. This would be the first rate cut this year. The majority of the remaining respondents believe the Fed will keep rates unchanged at the next meeting.

U.S. President Trump has repeatedly publicly pressured Fed Chair Powell to cut rates over the past few months, but the Fed has not adjusted rates in its past five decisions, including the most recent meeting at the end of July. Powell and his Fed colleagues cited the uncertainty of Trump's tariffs, inflation exceeding the Fed's 2% target, and relatively low unemployment as reasons for keeping rates unchanged.

The most closely watched event this week will be the Fed's annual Jackson Hole Global Central Bank Symposium in Wyoming. Some market participants are closely focused on whether Fed Chair Powell will signal a rate cut in September.