Economy Not Breaking: JPMorgan Asset Management's Aronov

Many investors are struggling with right now. It's that mixed economic data you're seeing out there. And if you had to cut through the noise, Oxana, how do you really start to piece together how much room there really is for the Fed to cut given where inflation is and given the weakening you're starting to see in the economy? Well, I would contest that you're really seeing a tremendous amount of weakening in the economy, right? Where what is the Fed cutting cycle really telling us? And when we look at past Fed cutting cycles, what did we see? We saw higher unemployment rates. We saw lower, significantly lower inflation. We would see housing issues, we would see issues with credit card delinquencies, which are starting to actually trend down and by the way, never impacted the top 50% of income spenders. And that's really where the services and all other kinds of consumption is being driven by. And we saw services expanded this morning, again, I think the largest number in two years. So I would contest that we're seeing it. You know, anything really breaking and a Fed cutting cycle really is meant to address kind of meaningful breakages. And I think outside of something breaking here, I don't think there is any impetus for the Fed to do anything. And I think investors should really tread carefully around what is priced in, right? So when they're looking at the 10 year at, you know, 4.2 or wherever it is today, really still price for a 2% inflation world, is that really the world we live in, right? What is priced in when they're looking at credit spreads that are razor thin? You guys wrote this morning about high yield investors buying investment grade credit debt because the spreads are so minimal between the two. You know, junk bonds are sitting within 1% of three month T bill yields. So what is priced in when you're buying these junk bonds, right? Why are you taking on that risk? And and is it really going to reward you in a world where rates may actually move up if there is a continuation of strong growth or if there is that kind of falling off a Cliff and the Fed has to cut, cut credit is equally vulnerable to both of those scenarios here. So I think that's really the important question is what is priced in?

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