Mid-year outlook webinar: To cut or not to cut?
July 01, 2024
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2 min read
Portfolio Manager Jack Janasiewicz and Portfolio Strategist Garrett Melson offer their thoughts on inflation, the health of the consumer, Federal Reserve policy, and market expectations for growth and earnings.
- Inflation is trending in the right direction, with core goods and supercore services deflating slightly month over month – but shelter remains sticky.
- The September Federal Reserve meeting would be next chance for a cut, but Fed Chair Powell still wants time to see how the trends continue.
- The US consumer remains the key driver of growth, and there are signs that consumers may be trading down for cheaper priced goods.
- But there is bifurcation, and the data shows that the stress is greatest on the poorest 20% of consumers. This cohort accounts for only about 9% of consumption compared to 60% for the top 40% of earners.
- Total consumer revolving debt is at a record high, but history shows that it always trends higher over time.
- Income is higher across all earning levels and income drives consumption, so conditions are getting better, not worse.
- We expect to see softer inflation prints continue, based on disinflation still in the pipeline, and this puts a ceiling on yields.
- Growth is slowing, but from a high level, and this puts a floor on yields.
- When rate volatility compresses, it’s good for risk appetite – the sweet spot for equity markets.
