US equities (^GSPC, ^DJI, ^IXIC) are moving higher after the Personal Consumption Expenditure (PCE), which is often referred to as the Federal Reserve’s preferred measure of inflation, was roughly in line with expectations, rising 0.2% from the prior month. As more economic data seems to show inflation is cooling, many on Wall Street are expecting a rate cut from the Fed to happen as early as September, but could there be more to consider? Janus Henderson Investors global head of multi-asset Adam Hetts joins Morning Brief to give insight into potential movements from the Fed and what investors need to keep in mind. Hetts affirms: “The bottom line here is that we’ve got the economy chugging along. I think we had a bit of a reacceleration earlier in the year, and now we’re in this mode of slowly slowing, which is where this Goldilocks optimism is coming from. So I think all systems go, green lights on the economy as far as the news this week.” However, he notes that there is a “big disconnect between what the economy is telling and what the market seems to be expecting and pricing in, and that’s a source of risk for us as we’re thinking about the next six months in market returns.” In terms of investing opportunities, Hetts states: “We’re focusing on the economic optimism, and we’re focusing on the fact that the market is relatively expensive. And you probably could expect a correction to that between now and the end of the year… Luckily, that spells a lot of opportunity for the market broadening and for investors that have wanted to diversify away from those concentrated, expensive names.”
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