The heat is on for the Federal Reserve as stock market sell-offs (^DJI, ^IXIC, ^GSPC) following July's disappointing jobs data are placing further pressure on the central bank to cut interest rates before its next scheduled policy meeting in September.

"We're seeing red lights on three things — fundamentals, policy, and technicals. And they are feeding onto each other," Allianz Chief Economic Advisor Mohamed El-Erian warns, plainly stating the Fed waited too long in 2024 to initiate a rate-cutting cycle.

The University of Cambridge, Queens’ College president and former PIMCO CEO comes onto Market Domination to outline why an early rate cut before September's FOMC meeting could "give the completely wrong signal to the marketplace" and enforce recessionary sentiments from American consumers.

"I think we are in overshot territory in several segments of the marketplace already. Certainly in fixed-income in terms of government bond yields, the sort of declines we've seen, especially at the front end of the curve, are, in my view, an overreaction," El-Erian tells Yahoo Finance. "So look at whether this overreaction [starts] getting corrected or not. The ISM services number today reminded people that the economy is not completely in recession. It's the risk of recession, not in recession..."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Luke Carberry Mogan.