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Wall Street has never been more sure lower rates are coming. But as always, the devil is in the details.

The latest BofA Global Fund Manager Survey released Tuesday shows that 93% of investing professionals who manage a combined $590 billion in assets believe short-term interest rates will be lower in one year.

That figure marks an all-time high stretching back to the beginning of the survey in 2001 — far surpassing the pandemic high of about 60%, as well as the survey results in 2008, which topped 80%.

This extreme opinion is buttressed by its corollary: The Fed's monetary policy is already at an extremely restrictive level. Fifty-five percent of survey respondents believe as much, which is the highest level since October 2008.

That comparison is notable. Back then, Lehman Brothers had just failed, and the Dow was routinely dropping hundreds of points any time an official appeared on national television attempting to calm the public.

Today, the biggest credit risk is related to the Japanese yen carry trade, which blew up last Monday. And while it may cause further destabilization across the Pacific, the carnage has been contained.

Nevertheless — as is typically the case on Wall Street — the incident only served to ramp up rate cut expectations, for which the stars are finally aligning. Economic data has also softened to the point that the issue of Fed independence (lowering rates ahead of an election) has taken a back seat — essentially greenlighting a move at the mid-September meeting.

The July unemployment level jumped to 4.3% and triggered the Sahm Rule recession indicator — pivoting the rate cut discussion from "if" to "how many" in September. Currently, markets are pricing in 36 basis points, or about one-and-a-half rate cuts.

Thursday's weekly jobless claims will also be closely watched for any outliers, but the big event this week comes down to the inflation numbers released by the BLS Wednesday.

Only a large, unexpected jump in inflation Wednesday would begin to take September off the table. And any surprise weakness will likely boost expectations for cuts.

In fact, the worst case for investors would be a reading that confirms outright price deflation, which would likely signal the US is already in recession. Investors might recall that's precisely what the Sahm Rule attempts to measure — the onset of recession.

As we've been saying, bad news really is bad news again.

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