The Consumer Price Index (CPI) report has shaken markets, with the March reading coming in hotter-than-expected at 3.8% versus the estimated 3.7%. This has sent stock futures (NQ=F, YM=F, ES=F) falling as investors grapple with the implications for Federal Reserve monetary policy. Wells Fargo Head of Equity Strategy Chris Harvey joins the Morning Brief to discuss his outlook.
Despite futures declining on the back of the CPI print, Harvey believes the Fed will take a more gradual approach to rate cuts, which he sees as a positive. In his assessment, "the market is a momentum growth large-cap market" that can only move higher from here, supporting his decision to raise his S&P 500 (^GSPC) target.
Harvey notes that this report solidifies the expectation of the Fed embarking on a "multiyear easing cycle." While he acknowledges that "the economy is better-than-expected, but it’s not very strong," Harvey advises investors to maintain a "balanced approach" to their portfolios, adding both growth stocks and defensive positions "for days like today."
Looking ahead, Harvey suggests that with earnings season underway, there could be a slight upside in the market, but he cautions investors not to "expect fireworks" anytime soon, given the volatility he anticipates.
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