Edward Moya, chief market strategist with Oanda, joined Cheddar News to discuss Thursday's gains as investors were surprised by a jump in weekly job claims and as Wall Street braces for key inflation data and the Fed's latest policy announcement.

<div class="block">Edward Moya, chief market strategist with Oanda, joined Cheddar News to discuss Thursday&#39;s gains as investors were surprised by a jump in weekly job claims and as Wall Street braces for key inflation data and the Fed&#39;s latest policy announcement.</div>

Closing Bell

Analyst Discusses Market's Recent Gains Ahead of Inflation Data, Fed Policy

Joining me now is Ed Moya, chief Market strategist for a look at the New York Stock Exchange here. It's great to have you on the show. Thank you for having me. It's great to be back. It is good to see you in person. Of course, amid what's a pandemic, that's pretty much now behind us, but good gains on the floor of the New York Stock Exchange today. What should investors know about this rally? Well, it seems like today some of the rally was sparked by a disappointing jobless claims number, highest levels since October 2021 bad news is now good news. It's kind of supporting the argument that maybe the fed is going to be done with tightening. It seems everyone is convinced we're going to see the markets to anticipate a skip, possibly that skip to turn into a hold in July. And it seems that a lot of this rally, it's a I driven, I mean, we've had mega cap tech save the stock market. We would have seen probably a correction territory move if it wasn't for the A I movement. And I think right now there's, you know, this wait and see approach, what type of recession are we going to have? When is it going to be, how hard hitting? And we might just see like a rotation out of mega tech, the defenses cyclical. But right now this is a stock market that it just doesn't want to break. Yes. So I think a lot of people are wondering why are stocks up so much? You mentioned the A I rally but does a rally like this make sense? If a recession is on the horizon, it's difficult because there's been so much resilience with the economy. And I think right now, what we're starting to see is there's parts of weakness in the service sector. But now, you know, part of the manufacturing part of the economy that was so weak, it's now starting to stabilize. So I think there's a lot of optimism here that, you know, we're not going to just have like your traditional recession, it's going to be possibly a little bit scattered. And ultimately consumer spending is probably not going to completely fall off a cliff. And while we're, you know, pricing in this earnings recession, you know, next year earnings are going be pretty optimistic. So we're not going to see, I think tremendous downside over the next few quarters. Interesting and you feel like companies can still post good earnings even as we expect according to the fed share of the debt market to tighten. Yes, I think there's so we're going to have a trillion dollars come into of issuance over the next several months and a lot of that will be absorbed. I think when we take a look at the last four times in the last 20 years, when we've had a significant amount of issuance, the market absorbed it. And I think right now everyone's kind of fearful that, well, we're already seeing the regional banking crisis. You throw that issuance, maybe we'll have some disruption in the markets and that could happen. But it's not likely to, I think completely, you know, and this economy tail spending. So understandably. So, I mean, investors are in a tough place right now, right? Inflation is still high. Do they put their money into stocks? They don't want to miss out on the rally and the rally is already getting ahead of itself, I think by many standards this year. But if a recession is on the horizon, could those gains quickly turn to losses? What should an investor do in this environment? Well, right now, I think, you know, it depends on your risk tolerance and your portfolio. I mean, if you miss out on the rally and you're very concerned that the A I trade, it just won't live up. I mean, we've seen NVIDIA up over 150% and basically alphabet Amazon, Apple and Microsoft, they're, you know, roughly 40% higher in the year. It's going to be really hard for them to continue those gains. So a lot of people are going defensive, you're getting attractive yields and short term treasury bills. So I think there's, there's a defensive trade, but I think a lot of people are anticipating what's going to outperform and it's going to be the small cap. It's going to be the cyclical trade and that's difficult to navigate considering we are going to see weaker consumer spending. We are seeing credit card delinquencies rise, the consumer is going to be a lot weaker. So you have to be very careful on how you do that trade. I think some people would think maybe that small caps aren't a defensive play, but you do think that those are well positioned, I think they're undervalued and I think right now they have a potential to outperform. I think when people abandon, you know, this overweight position on mega tech, they're going to go to the most beaten up sectors and those are going to probably eventually once this economy normalizes out performance, you know, we talk so much obviously about the US economy. What about international stocks? Do those look attractive at all? I mean, other than a major European bank, right, that did collapse alongside some of these regional US banks does seem like they've been holding up fairly. Ok. I mean, Europe is now performed. I mean, Europe has, you know, record highs and you've seen such, I think a strong performance and now they're going to be met with much more rate hikes by their respective central banks. So the ECB is going to deliver at least two more rate hikes. And I think you're going to see that inflation is going to possibly prove to be stickier there. They have much more harder fight there. So I'd be a little bit more conservative with exposure abroad and I think European investors, they're a little hesitant to buy us stocks and you know, enter our fixed income markets because of the hedging costs. So FX is going to prove to be a little troubling. I think over the next couple of months and my producer messaging me here that Wall Street officially entering a bear market today as the and P is up percent from that October low, right? So in a recession, we can fall anywhere between 20 to 30% historically on average. But I think it is, most people at least have said they don't think we're going to retest that October low. What do you think? Yes, I think that's been kind of erased from most people's talk tracks. I think we've seen too much resilience and I think the risks that are ahead don't warrant a significant 20% drop. So maybe 5 10% at most. Ok, Ed Moya, Chief Market Strategist at Oanda. Ed. Thank you so much for coming on the show. Thanks for having me.