Darius joined our friends at Mornings With Maria on Fox Business last week to discuss inflation, rate cuts, the resilient US economy, and more.

If you missed the interview, here is the most important takeaway from the conversation that has significant implications for your portfolio: 

Many positive fundamental catalysts are driving the market’s strong performance. Growth has been resilient, the labor market remains robust, and inflation is increasingly behaving in a manner that allows the Federal Reserve to consider policy rate cuts.

  • While the economy has been resilient, we believe it is likely to slow over the medium term. However, our research indicates growth is likely to surprise to the upside, and inflation is likely to surprise to the downside. This combination could cause the current GOLDILOCKS Market Regime to persist.
  • That said, current market conditions are not an all-clear signal for investors. We are in an adverse spot in the positioning cycle, with various metrics indicating we are in the late innings of the market cycle. Many indicators we track in our 42 Macro Positioning Model are flashing red for medium to longer-term risks despite optimistic calls for the S&P to reach 6000.
  • The U.S. economy has experienced a K-shaped recovery, where different segments of the population recover at different rates. The top third of income earners account for 51% of total consumer spending, while the bottom third accounts for only 15%. This disparity has significant political ramifications for this year’s election, and when considering the direction of the stock and bond markets, it is crucial to view the economy in aggregate terms.

That’s a wrap! If you found this blog post helpful, go to www.42macro.com/research to gain access to 42 Macro’s proprietary trading signals, asset allocation recommendations, and portfolio construction pivots.