The Federal Reserve may have new incentives in the second quarter to cut rates deeper this year. Canaccord Genuity’s Tony Dwyer believes that a deteriorating jobs market and easing inflation will ultimately push the Fed to take action. Dwyer expressed concerns about the accuracy of the jobs data due to falling employment survey participation rates. He emphasized the need for rate cuts to support various sectors, including financials, consumer discretionary, industrials, and healthcare stocks. Dwyer also mentioned that market performance is expected to become more even by the end of this year into 2025.
Dwyer highlighted the importance of broadening earnings growth participation beyond the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla), which have been outperforming the broader market this year. He advised caution when the market is overbought and suggested waiting for better opportunities, particularly when there is worsening employment data and rate cuts. The S&P 500 recently closed at a record high and posted its strongest first-quarter gain in five years.
Overall, Dwyer’s outlook suggests a cautious approach to investing in the current market environment.
Canaccord Genuity’s Tony Dwyer predicts that the Federal Reserve may cut rates further in the second quarter of this year due to a deteriorating jobs market and easing inflation. Dwyer believes that falling employment survey participation rates are skewing the Bureau of Labor Statistics’ jobs report data, leading to negative revisions. He expects the rate cuts to benefit financials, consumer discretionary, industrials, and health care stocks. Dwyer also anticipates a broadening of earnings growth participation in the market, moving away from the dominance of the “Magnificent Seven” mega-cap stocks. Despite the S&P 500 reaching record highs, Dwyer advises waiting for a better opportunity to invest, which may come with further rate cuts.
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