US Equities (^GSPC, ^DJI, ^IXIC) are moving higher on Thursday afternoon, digesting softer-than-expected US jobless claims, with chip giant Nvidia (NVDA) leading a tech sector rebound. The Wealth Alliance President and Managing Director Eric Diton joins Market Domination to give insight into the movements in the market and what investors need to know moving forward.
Diton begins by discussing the Federal Reserve’s role in how the market is playing out: “Jay Powell wants a 2% inflation. Careful what you wish for. When you want 2% inflation and you raise rates 11 times, the economy is going to slow and at some point, you’re going to have to pivot. So we saw at the end of last week a number of really weak numbers; PMI manufacturing, down 4 to 5 months in a row, down 20 out of 21. And PMI services services, 76% of consumption, turned negative into contraction.” “I really believe Jay Powell should have cut last week. He didn’t and I think the markets are starting to get very comfortable with what could be a 50-basis-point cut in September. The Fed is behind the curve.”
He continues with: “We just had 2.8% GDP. The economy looks pretty strong. We’re 4.3% unemployment. That’s a that’s a very reasonable solid number. But let’s remember, it’s almost one percentage point higher from where we were not long ago, so the trends are what are spooking the market and the Fed needs to act.”
He offers this to his clients in terms of investments in the current environment: “You’re going to want to own small-cap stocks. Understand that in the last three years… the Russell 2000 (^RUT) has a negative annual return. Everyone thinks it’s a rip roaring bull market, negative annual return. Whenever we’ve had subpar returns from small caps the next three years, they’re up 99% of the time with an average return of 16.7% per year. And they’re trading at 15 times earnings.”
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