Tony Pasquariello Discusses Market Expectations and Tech Earnings
In a recent interview, Tony Pasquariello, the Global Head of Hedge Fund Client Coverage at Goldman Sachs, shared his insights on market expectations, the potential interest rate hike by the Federal Reserve, and the impact of tech earnings on the market.
Pasquariello acknowledged that investors are currently cautious due to geopolitical uncertainties and the behavior of the bond market. He mentioned that although tech earnings have had a significant impact on the market, overall earnings quality for the quarter was satisfactory. He explained that market reactions to tech stocks were influenced by broader risk factors and companies that didn’t revise their 2024 guidance upward faced market penalties.
He expressed hope that bonds and yields are reaching their peak, which could potentially ease the rate market and provide some relief to the equity market. Pasquariello emphasized that investors have been most nervous about the back end of the bond market.
Potential Market Catalysts and Federal Reserve’s Rate Hike
When asked about potential market catalysts for the rest of the year, Pasquariello pointed out that strong but not overly robust growth could have a positive impact. He stated that if growth slows down slightly, it could create a more favorable environment for the market. He also mentioned that while market sentiment is currently negative, he expects a strong corporate bid in November and December.
Regarding the Federal Reserve’s upcoming FOMC meeting, Pasquariello believes that they are likely done with their current rate hike cycle. He noted that considering the strength of the economy, the backup in the market since summer is equivalent to approximately 75 basis points of rate hikes, which might be appropriate.
Raphael Bostic Discusses Economic Issues and Federal Reserve Policy
Raphael Bostic, President of the Atlanta Federal Reserve, recently appeared on CNBC’s “Squawk Box” to discuss various economic issues. He highlighted the contrast between public sentiment and economic data, his perspective on Federal Reserve policy, and the current state of the economy.
Bostic acknowledged the complexities of the current economic environment, including fluctuating inflation rates and a robust broader economy. He emphasized the importance of focusing on future economic projections rather than solely relying on present circumstances.
Economic Slowdown and Inflation Concerns
Based on his interactions with businesses, Bostic anticipates an economic slowdown. He takes these real-world observations seriously and incorporates them into his economic analysis. Bostic stated that he doesn’t expect the Federal Reserve to cut interest rates until at least mid-next year, as he and his colleagues share concerns about an impending economic slowdown and believe that the full impact of policy tightening is yet to be felt.
Regarding inflation, Bostic highlighted that the current rate is 3.7%, significantly above the Federal Reserve’s 2% target. He emphasized the need to control inflation as a top priority. However, he clarified that he does not anticipate a full-blown recession despite expecting an economic slowdown.
“Wait and See” Approach and Chairman Powell’s Comments
Discussing recent comments from Federal Reserve Chairman Powell, Bostic mentioned that the committee is adopting a “wait and see” approach. He cautioned against signaling a policy relaxation due to the inflation rate remaining above target.
Hot Take: Market Caution Amidst Geopolitical Landscape and Tech Earnings Impact
Investors are currently exercising caution in light of a fragile geopolitical landscape and the behavior of the bond market. The impact of tech earnings on the market has been significant, with companies facing market penalties if they fail to revise their 2024 guidance upward. However, the overall earnings quality for the quarter has been satisfactory. The market’s reaction to tech stocks is influenced by broader risk factors. Investors are most nervous about the back end of the bond market, but there is hope that bonds and yields are peaking.
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