Darius joined Caroline Woods on Schwab Network last week to discuss the current risk-on Market Regime and its implications for asset markets.
If you missed the interview, here is the most important takeaway from the conversation that has significant implications for your portfolio:
The Market Remains In A Risk-On Regime, And We Believe It Has Room to Run
- At the beginning of the month, our Positioning Model flagged an elevated risk of a short-term correction. While some investors point to geopolitical factors as the cause of the correction, we believe the market was stretched thin in terms of positioning and needed a cooling-off period.
- We believe the market rally will continue because several fundamental themes, including our “Resilient US Economy,” “China Front Loading Stimulus,” “Green Shoots Globally,” and “Jay and Janet Want A Soft Landing,” may contribute to upside risk in asset markets. Until the drivers causing these themes dissipate, we expect asset markets to perform well.
- Although the Fed is discussing rate cuts this year, we maintain that the resilience of the US economy negates the need for cuts, as the economy continues to grow at an at-or-above-trend pace on a real basis and at a well-above-trend pace on a nominal basis. The hawkish repricing of policy rate expectations is bearish, but only to a point in this context. Said simply, the resilient US economy is unlikely to require rate cuts anytime soon.
That’s a wrap!
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