Stock markets (^DJI, ^IXIC, ^GSPC) are rallying Tuesday following softer-than-expected Producer Price Index (PPI) data for July, providing some relief to markets after a tumultuous week on Wall Street. This uptick comes ahead of the highly anticipated Consumer Price Index (CPI) data set to release Wednesday. SEI chief investment officer Jim Smigiel joins Market Domination to discuss his market outlook.
Smigiel characterizes the current market movement as a "nice relief rally" in response to softer inflation data, though he finds it "surprising" ahead of the CPI data release tomorrow, which he considers "the more important shoe." He cautions that markets may be getting "a little bit ahead of themselves," noting that inflation has been in the 3-3.7% range for a while, adding, "we haven’t really seen that breakout just yet… back to a trajectory that makes us confident."
Regarding Federal Reserve rate cut expectations, Smigiel notes that these have continually shifted throughout 2024. However, he notes this "hasn’t really affected the market at all as we’ve kind of been in this raging AI-led bull." Nevertheless, he believes markets are currently "poised for a disappointment" when it comes to Fed rate cuts, predicting they will be "quicker" and "more shallow than the market expects," potentially creating "a headwind for markets."
For investment strategy, Smigiel highlights the importance of portfolio diversification. He also highlights the commodities sector as a buying opportunity, stating, "we are in a longer-term bull market in commodities."
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