The second quarter could see more incentive for the Federal Reserve to cut rates deeper this year.
Tony Dwyer of Canaccord Genuity believes a worsening labor market and lower inflation will eventually 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 said Thursday on CNBC’s “Fast Money.” “One of the most aggressive things I talk about with clients is how bad the incoming data is.”
Dwyer argues that falling participation rates in employment surveys are distorting Bureau of Labor Statistics reporting data. The next monthly employment data is due out on Friday.
“It’s not that they are manipulating the data. Conspiracy theories are going crazy over these things. They don’t really have a good data collection mechanism. So, the changes are significant, and most of them are negative now,” Dwyer said. “We’re focused now on making sure that rate cuts are what you need.”
At the Federal Reserve’s interest rate meeting in March, officials tentatively planned to cut rates three times this year. These will be the first cuts since March 2020.
Dwyer expects the rate cut to finance, at the discretion of the consumer, industrialists And healthcare shares rise. This year the groups are positive.
“Our call is to buy into the expanding theme of weakness, rather than simply adding to the mega-cap weighted indices. The top 10 stocks still represent 33.7% of total SPX volume. [S&P 500] “Market cap,” he wrote in a recent note to clients. “History shows that it is historically high and does not last forever.”
According to Dwyer, market efficiency will become much higher even by the end of this year and by 2025.
“It’s not just Mag 7”
“This comes through increased participation in revenue growth. It’s not just Mag 7,” he told Fast Money.
The Magnificent Seven, consisting of Alphabet, Amazon, Apple, Meta platforms, Microsoft, Nvidia And Teslaoutperforms the broader market this year, up 17%, while S&P 500 Index 10% higher.
The S&P 500 closed at a record high Thursday and just posted its strongest first-quarter gain in five years.
“When you’re so overbought and on such an extreme rally, you just want to wait for a better opportunity,” Dwyer said. “In our opinion, this is due to worsening employment data, which leads to lower rates. You should worry about the economy. That’s when I want to come in.”
Denial of responsibility