The Fed’s likely to cut “aggressively” and when it comes to risk assets, it’s best to “sell the first cut.”

That was the (familiar) message from BofA’s Michael Hartnett who, writing in this week’s installment of his popular “Flow Show” series, said although it’s “not all doom and gloom,” some of the incoming macro data is “challenging” for the soft landing crowd.

A US jobs report billed as “make or break” turned out to be inconclusive on Friday, and the readouts didn’t fall neatly into Hartnett’s framework. A soft landing report would’ve been an NFP headline between 150,000 and 175,000 accompanied by a MoM average hourly earnings print of 0.1% or cooler. A hard landing report would’ve seen headline payrolls print sub-100,000 and the jobless rate move up to 4.4% or higher. Instead, jobs growth was 142,000, AHE was 0.4% and the UNR was 4.2%.

My guess is that Hartnett would argue the big downward revisions to the NFP headlines for June and July skewed the release towards a hard landing interpretation, while the upside AHE readout nodded towards stagflation, even as positive real wage growth should at least support stretched consumers.

In any case, Hartnett cited the usual canaries, including the 2s10s dis-inversion (re-steepenings presage recessions, as illustrated on the left, below), the ISM inventory-sales ratio and ISM’s historical correlation to payrolls.

Note from the figure on the right that headline jobs growth “should” slow dramatically to catch down to America’s marquee manufacturing survey which has only been above the 50 demarcation line one time in 22 months.

Hartnett wasn’t done. There’s “no sign lower rates are helping US housing,” he went on, adding that the rest of the world “ain’t growing.” On that latter point, he cited record lows for China’s government bond yields. Note that the PBoC recently made good on threats to start selling the Chinese long-end in a bid to put a floor under yields, a desperate move that underscored how entrenched market bets on deflation for the world’s second-largest economy have become.

Ultimately, Hartnett’s message was the same. The first cut’s a “sell.” As discussed here, equities (index) got the memo early last month but quickly discarded it on the way to rallying back near record highs.

The figure above is meant to be ominous. And I suppose it is. Or as ominous as chart disconnects can be.

Hartnett drove it home. “We say… wait for a better entry [point] to risk assets because fiscal stimulus is reversing [and] real rates are now punishing the US small business sector,” he cautioned, noting (for the second time in as many months) that the prime rate in real terms is the highest this century.