Stocks are off to a sluggish start this morning after the S&P posted its biggest weekly percentage gain since June. Brian Jacobsen, Senior Investment Strategist at Allspring Global Investments, joins Cheddar News to discuss if investors should be cautious, whether the rally we saw last week was a classic 'bear market rally,' and whether we will we see the momentum continue this week.

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Stocks Off to Sluggish Start Monday After Major Rally

joining us now to discuss all of this is brian, Jacobson, multi asset strategist at Wells Fargo asset management, brian, thanks so much for joining us this morning stocks, as I mentioned off to a bit of a sluggish start this morning after the S and P did post its biggest weekly percentage again since june. Should investors be cautious? Was the rally that we saw last week, a classic bear market rally? Or will we see this momentum continue? Yeah, thanks for having me. And so here here at all spring global investments on my systematic edge multi asset team. We think that what we had on thursday might have been a little bit of an overreaction to some pretty decent inflation data, we're really paying close attention to what this means for Fed officials. Governor Waller just spoke, it was either this Morning or last night. I think he was in a very different time zone than what I am. But he basically said, anticipate a 50 basis point hike at their next meeting, but possibly also at subsequent meetings. Now he said plural, as far as subsequent meetings, meaning that he probably wants to take us up to something closer to about 5% of the Fed funds rate. So even though the inflation data was positive for the markets, we think that the Fed rhetoric is going to keep pushing back on any sort of positivity and enthusiasm we see in the market. So in a way maybe you can kind of think about this as fade some of the euphoria, but also you could maybe buy into the dips on any sort of pessimism that might creep in. Now brian, you know, tech stocks have been hit especially hard during this volatility that we've seen with a pullback in digital ad spending for example. But tech stocks were partially leading this rally that we saw last week with their biggest gains since after the financial crisis. Should investors be adding tech to their portfolios? Right now? We're beginning to warm up to tech a little bit. We've seen quite the tech wreck and you don't often times go from a wreckage to a rebound in those types of sectors. It can be a very kind of choppy bottoming formation and there could continue to be some pressure as far as digital ad spending, maybe there was too much of a proliferation of these different streaming services, people beginning to cut back on their monthly spa as far as these different subscriptions. And so the area of technology that we like is actually more in the areas of technology, say, within energy or technology within industrials, So not necessarily technology as far as social media things heavily dependent upon digital ad spending, but more of those classical areas of technology about how is it, which companies are on the right side of change and allow you to invest in improved productive capacity in other areas. And so that's why we really like working with some of like say on our dynamic growth team where they're really looking for those underappreciated growth opportunities that aren't necessarily so heavily tied to the digital space. It's more about classic efficiency and technology improvements now brian Goldman Sachs is expecting significant reductions in U. S. Inflation in the coming year because of factors like supply chain constraints, peak and shelter inflation and other things at the same time. The I. M. F. Is looking globally has a more pessimistic outlook than we were kind of anticipating here. So given sort of these two factors here, what do you expect? You do believe that inflation has kind of peaked here in the U. S. And what does this mean for the world globally as well? Yeah. When it comes to inflation I think that the I. M. F. It's really important to remember that as an institution they tend to be a little bit more conservative with their outcome with their forecasts almost having a bias towards pessimism as opposed to optimism. And we tend to be a little bit more what we would like to think of being more realistic about the inflation outlook which is that we should see some improvements about half of the inflationary pressures that were feeling right now are likely still due to lingering supply chain problems. And so if china begins to inch away or even modify around the edges of zero covid policy or as businesses just learn to adapt to this new reality, then we should actually see those inflation numbers materially improve over the course of this next year. So from the supply side we think that there's a positive trend as far as declining in Inflation. But even on the demand side from consumers slowing spending is likely to remove some of this inflationary pressure and we could be close to say like maybe 3% as far as an annualized run rate for inflation by the end of 2023 which is much better than where we are now. Now I want to pick back on your point about China of course we have President Joe Biden, Chinese President Xi Jinping meeting in Indonesia today. What do you expect to come out of that meeting Brian? Yeah it would be really interesting to look at those transcripts from that three hour meeting, especially the summary that comes out from both sides and then to see if you can reconcile the two of them because they're obviously going to pick out, you know kind of cherry pick the their favorite points from the meeting. We think that it's more important that they're actually beginning to communicate face to face. You know they are trying to cut off the communications effectively back in august after Speaker Pelosi went to Taiwan now that we're seeing a little bit more pa positive tone coming out of them. You can't expect a big breakthrough with negotiations or on any major issues if you're not going to communicate and so given that they're communicating and Secretary of State Blinken is scheduled now to go to china, we think that's a positive sign for a thawing of the relationship between the two superpowers, brian Jacobson, senior investment strategist, are all all spring global investments. Thank you so much for your time this morning.