Northwestern Mutual CIO Warns Investors to Brace for All Outcomes Amid Fed Rate Cut Bets

The prospect of U.S. interest rate cuts has intensified after weak labour market data, but investors should avoid assuming policy easing will provide an immediate cure, according to Northwestern Mutual Wealth Management chief investment officer Brent Schutte.

Schutte said in his latest weekly market commentary note that markets are now fully pricing in a cut at the Federal Reserve’s 17 September meeting, with the possibility of a 50-basis-point reduction.

The conviction stems from August’s nonfarm payrolls report, which showed hiring slowed sharply while unemployment rose to 4.3 per cent.

Treasurys rallied on the data, with the 10-year yield falling to 4.07 per cent, while equities slipped on concerns over the economic outlook. Yet Schutte cautioned against complacency.

“Rate cuts aren’t always the immediate magical cure for labour market weakness that some investors might hope,” he said, highlighting that the Fed has previously cut ahead of recessions.

He pointed to multiple headwinds that could weigh on jobs and growth despite looser policy, including low consumer and business confidence, lingering inflation concerns, global trade tensions, and the disruptive effects of emerging technologies such as generative artificial intelligence.

“As we said before, there is no way to see directly into the future—especially in a market that has been subject to unpredictable swings with each new tariff announcement, trade spat or global conflict,” Schutte said. Instead, he urged investors to maintain diversified portfolios “to prepare for all possibilities, wherever the economy takes us next.”