All eyes are on July’s Consumer Price Index (CPI) report, providing key insight into the health of consumers as they continue to battle inflationary pressures. Aptus Capital Advisors portfolio manager David Wagner joins Wealth! to discuss how the print may impact markets and how to best position your portfolio.
Wagner notes that deflation has become less of a market catalyst than it was a year ago. "There’s a lot of things out there that the market believes that it knows right now. It knows that if inflation continues to come down that we’re likely going to see [Federal Reserve interest rate] cuts in September," Wagner tells Yahoo Finance
If CPI comes in higher than expected, he argues, "that shouldn’t be too surprising because again, it’s widely known right now that inflation is falling, and two, is that the Fed is likely going to be cutting in September."
"Bottom line, if CPI reinforces that message, the grind higher can continue. If it refutes that message, don’t be shocked if we see some type of volatility in the market over the next week or two," Wagner warns.
As the market experienced significant volatility over the last week, Wagner encourages investors to "follow the tape, follow what the market is telling you." As inflation comes down and interest rates start easing, he sees opportunity in fixed income. He adds that the best asset class when rates come down is stocks (^DJI, ^IXIC, ^GSPC):
"People always forget that stocks are one of the longest-duration assets out there in the market. And if rates come down, I think that a rising tide is really going to lift all ships in the equity market, probably a little bit more specifically on the cyclical and small-cap side."
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