The Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC) have reached record highs as stocks rally following the Federal Reserve's interest rate cut last week. With an aggressive 50 basis point cut initiating the easing cycle, Wall Street is trying to gauge the Fed's next move and its implications for markets going forward.

Annex Wealth Management chief economist and strategist Brian Jacobsen joins Morning Brief to discuss this situation.

While initially surprised by the Fed's 50 basis point cut, Jacobsen says he's now "warming up to the idea" of another aggressive cut. Although he previously believed a 25 basis point cut at each meeting for the remainder of the year "made sense," he now expresses concern about continued labor market weakness.

"I think we're going to see more cooling of the labor market, which might tilt them more toward a 50 basis point cut as opposed to a 25," he tells Yahoo Finance.

Regarding unemployment, Jacobsen notes that layoffs currently represent a "very, very low" percentage of what's driving the rate higher. This suggests companies are retaining workers and allowing their workforce to "naturally shrink." However, he cautions that if layoffs accelerate beyond the hiring rate, it could lead to weakness in the job market.

Despite this, Jacobsen believes that the most crucial factor for markets right now is the upcoming earnings season, set to begin on Oct. 11.

For more expert insight and the latest market action, click here to watch the full episode of Morning Brief.

Read more: What the Fed rate cut means for bank accounts, CDs, loans, and credit cards

This post was written by Angel Smith