US equities (^GSPC, ^DJI, ^IXIC) opened little changed on Friday morning after a busy week filled with corporate earnings and inflation data, which showed signs that inflation is continuing to cool. With Wall Street betting the Federal Reserve will cut interest rates in September, where should investors look to buy into the market?
John Hancock Investment Management co-chief investment strategist Emily Roland joins Morning Brief to give insight into the dip in the market on Friday and what investors need to know about the market moving forward.
In terms of where opportunities lie, Roland points out that many investors seem to be picking up risk assets but should think about scaling that back: “We would actually be looking to prune risk, looking for higher quality areas of the market. Companies with great balance sheets, tons of cash, good return on equity and ability to maintain margins in an environment where we think margins are going to be shrinking from here. We’re finding a lot of that in mega-cap tech, which frankly, is where the earnings is.”
With the recent data related to inflation this week, Roland reminds investors: “We have to remember that there’s kind of a nasty side effect to inflation moderating, which is that profit growth is slowing. So revenue growth, which was awesome when we had inflation because companies could pass higher prices along to the end consumer… is slowing at the same time that costs are still elevated. So companies’ margins are being contended with right now.”
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