A recent survey by Strategas reveals that investors are largely anticipating the Federal Reserve to commence rate cuts in September, despite persistent hawkish sentiments. 

Weak U.S. economic data for April did not prompt Strategas clients to bring forward their expectations to June or July. 

Notably, the survey indicates that most of the firm's clients foresee only three rate cuts through May 2025, a significant shift from the January survey, where expectations included 100 basis points of cuts within the year.

Fed officials continue to advocate for patience to ensure inflation remains anchored, which Strategas says suggests further disinflation is necessary before initiating rate cuts. 

In addition, they feel that while restrictive rates are pressuring the economy, a significant deterioration in employment could expedite Fed action. 

However, absent "an unanticipated weakening in the labor market, we expect cuts will start in September," said Strategas.

The firm's survey also highlighted that the mean forecast for the Fed funds rate three months forward stood at 541 bps in May, with some clients still expecting cuts as early as June or July. 

For the six-month outlook, encompassing the September and November meetings, the mean rate fell 6 bps in May to 519 bps, indicating at least one cut by November.

"Standard deviations widened in the near term and long term while narrowing 12 months forward," added the firm. "This tells us respondents are more confident about where we'll be in a year, but uncertain about the road to get there."