Wall Street has its eyes dead set on July's Personal Consumption Expenditures (PCE) price index — the Federal Reserve's preferred inflation gauge — set to be released on Friday, and the much-anticipated interest rate cut to come at the Fed's next FOMC policy meeting in September.

J.P. Morgan Asset Management global market strategist Jack Manley believes the central bank will cut up to 75 basis points in the remainder of 2024, cutting rates by 50 points at the September meeting.

"The first thing we have to take into consideration, and [Fed Chair Jerome] Powell himself told us this at Jackson Hole last week, is that this is still very much a Federal Reserve that is data dependent. So while 50 in September and 25, let's say, in December, feel right right now, they might not feel right a week from now," Manley explains to Yahoo Finance. "And especially when we consider that we'll be getting August jobs data next Friday [September 6], that I think is going to help to further kind of crystallize this view on what exactly the Fed is going to be doing."

Manley lays out what rate cuts usually mean for fixed-income markets (^TYX, ^TNX, ^FVX) and what a recession could mean for small cap stocks (^RUT).

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This post was written by Luke Carberry Mogan.