US stocks (^DJI,^GSPC, ^IXIC) are losing some steam after the S&P 500 notched its 41st record-high close of the year. However, Carson Group chief market strategist Ryan Detrick believes the post-rate-cut rally is here to stay. He joins Morning Brief to lay out his case. Detrick believes that the Federal Reserve should have cut interest rates before September, explaining, “Inflation is last year’s problem. So we don’t need interest rates over 5% right now.” While the labor market is slowing, he notes that initial jobless claims hit a four-month low last week. “So are things perfect? No. Is the economy slowing down? Yes. Are we going into a recession? No, we don’t think so. And we think these rate cuts are going to continue to kind of juice this bull market, honestly help this economy going forward,” he tells Yahoo Finance. He highlights that the Federal Reserve has cut rates when the S&P 500 was near all-time highs. In 1980, the Federal Reserve cut interest rates 20 times within 2% of the index’s all-time high. “Are we going to have two back-to-back 20% years? It’s looking like it. Will we have three? Probably not. But at the same time, double-digit returns this time into next year if the economy hangs in there, we think it’s possible,” Detrick argues. He adds that small- and mid-cap stocks historically outperform when the Fed kicks off its rate-cutting cycle, and believes that investors could see 20% returns this time next year. Thus, he encourages investors to have diversified portfolios and rebalance every three to six months. He explains, “Don’t always chase a shiny object… We’ve been neutral technology most of this year. Three, four months ago, people thought we were crazy to say that. There are some really stretched valuations in technology, doesn’t mean we don’t like it. Again, we’re neutral, but there’s some other areas like financials (XLF), like industrials (XLI), small caps (^RUT), mid caps (^RUI), that are pretty cheap historically, and those areas we’re overweight.” With the presidential election just a month and a half away, Detrick warns that October will be a volatile month. He notes that markets do not like uncertainty, thus, it will likely stabilize after the election. He adds, “The good news for investors out there, November historically is very strong in an election year, and December is too. So if we get some rockiness in October, that’s OK.”
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