As investors grapple with uncertainty around the geopolitical conflict in the Middle East, the ongoing port strike, and other factors, Jeremy Schwartz, WisdomTree Global CIO, sits down with Josh Schafer and Madison Mills on Market Domination to discuss his expectations for the market. Schwartz says markets have been largely focused on the Federal Reserve and its next move, which investors hope Friday’s jobs report will shed some light on. He says the Fed’s 50 basis point cut acted as an “extra booster shot” and “earnings have been coming in good… “So the environment has been good for that underlying fundamentals of the market and you’ve got the Fed now contributing to a little bit easier conditions.” He says the 50 basis point cut could be “the key impetus” for small-cap stocks. “Small caps can’t issue debt the same way they’re borrowing at these floating rate instruments. So they’re paying the higher interest rates. So hopefully these lowering of rates helps ease their interest burden. But you also do need to see the earnings pick up. Now the economy has been strong. It tends to be, or it’s been holding in pretty resiliently. That tends to be good for small-cap earnings. But last quarter was not great. So you got to see it as we get to next quarter earnings have that momentum turn around.” On the economic front, “We definitely don’t think it’s that Powell sees something we don’t,” Schwartz says, explaining, “ Unemployment’s basically at their long-term target. Inflation is trending their direction. Now you have all these sort of short-term stuff. The port strike, the Middle East war… We think they will look through some of this short-term noise that inflation is coming down and that they can keep cutting, but it’s not that they see some underlying weakness. It’s that they realize their 250 basis points restrictive from a neutral policy stance from what they say is their neutral policy stance.” Schwartz indicates the market is pricing in one cut from the Fed in every meeting throughout the summer. “That would get them to that 3.5% by next summer. We would like them to go faster, but in reality, the good news is good news for the stocks. You want a good economy. You want strong earnings.” For more expert insight and the latest market action, click here to watch this full episode of Market Domination.
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