Dryden Pence, chief investment officer with Pence Capital, joined Cheddar News to discuss Tuesday's market session and touched on what the Federal Reserve may decide on at its next meeting as inflation continues to play a role and consumer spending remains firm.

<div class="block">Dryden Pence, chief investment officer with Pence Capital, joined Cheddar News to discuss Tuesday&#39;s market session and touched on what the Federal Reserve may decide on at its next meeting as inflation continues to play a role and consumer spending remains firm.</div>

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Analyst Discusses What Lies Ahead as Consumer Spending Remains Firm

Joining me now is Dr Pence, Chief Investment Officer of Pence Capital Dryden. Thanks so much for joining. Thank you for having me here. It's good to see you stock market down today kind of moving in a range, but there are risk factors out there. What's your take on the path forward for stocks? I think it's very murky at this point because you have this big debate. Is it a hike? Is it a pause? Is it a pivot? And so no one told the American consumer don't fight the Fed and the consumer still seems to be in pretty good shape, still spending on retail. And so those who are expecting this recession to come and that we get a bunch of cuts before the end of the year are probably going to be very disappointed. And I think that that's what people are trying to sort out right now and that's what we've heard from the Fed. I mean, Rafael Bostic said it yesterday, but the Fed chair Powell has been saying since mid March in the wake of those bank failures, that rate cuts are not the base case. And even a pause could indicate Right. Right. And that rates could still rise. It just means a pause for now. Exactly. Could you find the situation where they pause waiting for about 125 basis points of rate cuts to catch up because there's this lag effect. But that doesn't mean the next move is a pivot that, that may mean that we pause for a while and then we may have to raise again if inflation doesn't tamp down or the pivot comes much later, we've changed the narrative from how high to how long and the point of the matter is, is the American consumer is still pretty good. They're still spending and we haven't seen this contraction that the fed is want. So let's talk about that. The American consumer is still pretty good. They're definitely still spending. I think the data shows us that even though Home Depot would indicate, you know, maybe that spending is going to cool at least in certain sectors. But do they have money to spend? Well, everybody who wants a job has a job and you have people who, you know, everybody who's working, they're making money and those who are retired, they got an increase in their social security checks that are greater than the inflation. So you really have, you got also about 1.7 trillion of excess savings out there. So the consumer has money, those who want jobs have it and people spend, you know, there's more people working than ever before. They're making more money than ever before and they're spending more money than ever before. So, let's talk about what investors should do in this environment. Right. And what would you recommend? Two things on fixed incomes? Stay short because we think the pause would belonged and maybe even go into 2024 before you get a. So those who are long are probably going to be disappointed on the equity side. Kind of invest in the no matter what during this period of time of uncertainty, there's a few things that you can be sure that we're going to spend money on. We're going to spend money on infrastructure because that's already done. We're going to spend money on defense because that's already done. You probably on the retail side, you want to look at the lower end. So that's kind of your Walmarts and those things because going to see pretty resilient consumerism in those areas and also payments, payments are very important. You know, when you look at inflation causing prices to rise, payment companies are just getting better margins. Interesting. Well, let's talk about retail. I know you mentioned Wal Mart there retailers to report this week. Walmart target TJX companies. Of course, after that disappointing report from Home Depot today, Home Depot might not be one that would fit into your category always as a sure bet. But what about a Target and TJX? Well, I think Target and TJX target has got a problem in that they're middle market and that's the weakest part, the people at the lower end of the market, the Walmarts and the dollar savers and the TJX, those people saw an increase in real wages. You also have people in the middle part of the income stream having to tighten their belts a little bit. So they're moving down market and then you have companies like LVMH at the very, at the upper side doing very well. So you barbell, the consumer folks in the middle are going to be challenged. Ok. Well, it's going to be a busy week of results, that's for sure, Dr Chief Investment Officer at Capital. Thank you. Thank you, appreciate being here.