The Federal Reserve may have new incentives in the second quarter to cut rates further this year.
Tony Dwyer of Canaccord Genuity believes that a deterioration in the jobs market and a slowdown in inflation will ultimately push the Fed to act.
“I’m not saying they need to go back to zero, but they need to be more aggressive,” the company’s chief market strategist told CNBC’s “Fast Money” on Thursday. “One of the most aggressive topics I talk to clients about is incoming data quality.”
Dwyer says declining participation rates in employment surveys skew data from the Bureau of Labor Statistics’ employment report. The next monthly jobs reading is expected Friday.
“It’s not that they’re manipulating the data. The conspiracy theories go crazy with this stuff. It’s really that they don’t have a good collection mechanism. So the revisions are important and the most of them are now negative,” Dwyer said. “Our goal now is that these rate reductions are what you need.”
At the Federal Reserve’s policy meeting on interest rates in March, officials tentatively planned to cut rates three times this year. These would be the first reductions since March 2020.
Dwyer expects the rate cut to yield finance, discretionary consumption, industrial And health care stocks a boost. The groups are positive this year.
“Our call is to embrace the broader theme of weakness rather than simply adding mega-cap weighted indexes. The top 10 stocks still represent 33.7% of the total market cap of the SPX (S&P 500),” a -he writes in a recent note. to customers. “History shows that this figure is historically high and does not last forever.”
According to Dwyer, market performance will become much more uniform by the end of this year and through 2025.
“It’s not just the Mag 7”
“It comes from broadening participation in profit growth. It’s not just Mag 7,” he told “Fast Money.”
The “Magnificent Seven”, composed of Alphabet, Amazon, Apple, Metaplatforms, Microsoft, Nvidia And You’re hereis outperforming the overall market this year — up 17% while the S&P500 is 10% higher.
The S&P 500 closed at a record high on Thursday and just posted its biggest first-quarter gain in five years.
“When you’re that overbought and that bullish, you just want to wait for a better opportunity,” Dwyer said. “In our view, this is accompanied by deteriorating employment data that leads to lower rates. We need to be concerned about the economy. That’s where I want to step in.”
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