Wall Street breathed a sigh of relief this morning as initial jobless claims and July’s retail sales reports highlighted labor market and consumer resiliency amid continued inflationary pressures. BMO Wealth Management US chief investment officer Yung-Yu Ma joins Morning Brief to break down the prints and what it means for the economy ahead of the Federal Reserve’s September interest rate decision.
"It is a very sensitive market. And right now, all of a sudden, things have come together. And what seems like almost a Goldilocks scenario for the data is a tremendous shift from what we had a week or so ago when we had the market sell-off. But now we have CPI (Consumer Price Index) coming in soft, which was expected. But then we have weekly initial unemployment claims continuing down and retail sales coming in very strong. We have a very strong confluence of data now, along with Fed comments that they’re ready to cut rates and stand ready to respond to labor market softness. So it’s really coming together in a nice way. And we think the soft landing is firmly in place and probably actually setting the stage for growth acceleration toward the end of the year into early 2025," Ma explains.
In 2025, he expects market growth to come from pent-up corporate spending being unleashed when interest rates decline. Particularly in Big Tech, Ma sees "a lot of runway" for spending on not just AI data centers and chips, but a broader trend of companies investing in the technology to find efficiencies. While investors are torn on whether AI spending is sustainable and will turn a profit, Ma notes that the technology is "still in the very early stages." He therefore anticipates the technology to become "much more broad-based than it currently is in terms of how it permeates the economy."
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