Earnings growth could benefit stocks more than Fed policy, says G Squared's Victoria Greene

Peter, what’s your reaction to what we’ve heard so far and what do you expect to hear from Mary Daley? Well, Daley is important because she’s also a voting member. And there’s one thing about Powell is he likes consensus. So now we’ve heard from Bostic, we’ve heard from Waller. I’m assuming Bowman is a Hawk. Powell spoke. So I’d find it hard to believe that Daley is going to deviate that much from what they have said. Now also, June’s far off, so there’s no reason to commit right now to what you want to do in June. So I think she’s going to remain very non committal with respect to her commentary. Victoria, let me ask you something that we haven’t really discussed. What if rate cuts aren’t all that important? Do stocks benefit more from a healthy economy than they do looser policy? Is that being sort of forgotten in today’s trade? A little bit, yeah. And we’re going to hit earnings. I think JP Morgan kicks us off, you know, next Friday when financials really get us into Q2. And if the focus is on earnings and we have solid economic growth and we have earnings growth and we can see then you know, profit expectations rise throughout the year, then absolutely stocks and can overcome any cuts or lack thereof. And it has been more of a focus recently. Right now we’re in a dead period. Nobody’s really reporting. So everything’s on economic data. And so it’s very, very heightened obviously all eyes on unemployment Friday and it’s a little bit of potential bad news is good news. If we have some bad unemployment stats potentially that balances out sticky PCE. And I do think they will be data dependent. Everybody get their Fed bingo cards out data of a pendant patient way. The way the pros and cons, I think we’re we’re not going to see a huge policy shift unless we really get continued acceleration of inflation. And that deflationary goods trend is one that I’m watching. We’ve seen that really, really help with inflation, but now we’ve got commodities on the rise. So we’ve got to make sure we’re kind of watching the good side. I like the ISM, PMI in expansionary territory. China data wasn’t horrible. Some of that stuff is. There was a lot to like on the economic front for for stocks that are in the business of selling things, right. And even on the earnings front, I mean, it was the Magnificent 7 that carried the broader markets all of last year. But we’ve certainly seen more breadth this year. I saw a chart that showed that the S&P 500 X the The Magnificent 7 is actually we’re looking for better earnings out of them than the biggest mega caps themselves. What does that mean for the rally? Well, Sir, I think it’s fantastic to broaden out. I think that was always a problem. We were so concentrated. And I think right now the Magnificent 7 is breaking up kind of like the Beagles back in the day. It may not exist anymore. When we’re seeing the struggles specifically today, you know, with the Tesla issues, which is very much concentrated on EVs and vehicles. And so it’s great. I think there’s a lot of profit possibilities. I think the valuations aren’t quite as stretched as everything else. I think if you look around the value trade, the cyclical trade, energy, industrials, financials, those are working a little bit. You know, we always have risks that could pop up, CRE come back into play. Will regional banks be an issue when we suddenly care about the debt levels? None of that has mattered yet. If a company can produce earnings, if the company can raise expectations, especially if the company says, hey, we think we can make us a little bit more money, I think that’s great. The one area I think is going to struggle. What you’re seeing today is small caps. Small caps tend to be more levered. They tend to, you know, if they’re going to have to refinance at higher rates, you know, that’s a drag on a lot of them and that could be an issue and you’re seeing that play out with the Russell 2000 today.

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