Jason Ray, Founder And Investment Director At Zenith Wealth Partner, joined Cheddar News to discuss what to expect from the markets. 

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Stocks Open Flat Ahead of Fed Decision

I'm gonna bring back in Jason Ray founder and an investment director at Zenith wealth partners, which is an investment management and financial planning firm. Jason welcome back ventral jay Powell. As I mentioned, confirming last month that smaller rate hikes could be expected. So we talked a little bit about this before. But what are you expecting from the Fed today? And what is your outlook for the markets for the rest of the week? Absolutely. Thanks Chloe. Um you know, the Fed is in a tough position, right? We can't forget their dual mandate of moderating inflation and promoting, you know, strong employment in the United States. While inflation has been moderating over the last two months, we're still seeing unemployment up under 4% which is which is a great number for the US economy. And Um you know, I think we may see a surprise from the Fed today and hike of 75 basis points when I think investors are very optimistic and maybe overly optimistic about the Fed's dovish tone that we'll eventually see in the future. Yeah, Jason, how many are expecting? As you mentioned, the Fed to tilt toward the hawkish side in an effort to impress on markets and the Central bank is not yet ready to give up its rate hike stance. Do you agree with this? Um You know, I I think that the I don't fully agree and I think that the Fed will continue to take measures to slow the U. S. Economy to moderate inflation and control unemployment. So I think that, you know, investors are a little optimistic. I think looking ahead you know we may see um you know continued volatility and focus on short term earnings and yields rising as the Fed continues to moderate its dual mandate of inflation and unemployment. I want to talk about the consumer price index data that we saw out yesterday. It's showing signs that inflation is cooling though still at a high 7.1% annual pace. Is this a sign that we're in the clear is inflation kind of coming down enough to satisfy Fed officials at this point? It is a sign, you know it's hard to call two months a trend. Um I think it's positive momentum towards you know the state where we see a more accommodative Fed and less breaks being put on the U. S. Economy. You know I I do think the C. P. I slow down. It's good news and absolute price levels though have risen massively over the last couple of years. Which puts some pretty serious pressure on us households and consumer spending which is a huge component of our U. S. Gross domestic product GDP that could eventually you know have an impact on slowing the economy and sending the economy into recession. Jason in spite of historically high inflation, we have seen consumers continuing to spend. But you said that this quarter maybe the last in the in the future of relatively strong consumer spending. So what indicators are you looking at that are leading you to believe that? Yeah, no, so absolute price levels is a big one that I just mentioned. Um you know, looking at price levels and looking at consumer balance sheets is an important metric, You know, we also are looking at credit growth um you know, the amount of credit taken out by us households and businesses has been slowing as interest rates have gone up and people are less likely are able to refinance debt at lower rates um or they're paying higher rates of interest on their credit cards and variable debt that they have. So those two components of, you know, credit growth and uh total price levels are too, that really make a big difference and impact on consumer spending, you know, at the end of the year we typically see some sort of santa claus rally. I've heard mixed reviews on whether or not that's gonna happen. So what are you expecting in terms of that? Are we gonna get a santa claus rally and then based on your projections there, what sectors are you watching as we head into the end of the year? Absolutely. Well, it depends on if you're on the naughty or nice list for santa. I think the santa claus rally is, it's hard to predict. There's usually less liquidity in the market at year end as more folks have, you know, time off, I do feel like watching longer duration bonds and growth stocks as we see this Fed announcement as we see folks start to take into account a potentially more dovish Fed in the february meeting or next year. Um Long duration bonds and growth stocks I think are a great opportunity to watch um as we prepare for a potential santa claus rally alright, Jason. And also, you know, we've been talking about whether or not the Fed can sort of balance this act of cooling inflation but also not tipping the economy into a recession. You have however, indicated that you feel that consumers are gonna stop spending quite so much. So I have to ask, you know, are we headed for a recession and what might that look like? I think so, you know, I think it's it's imminent. Um you know, I think we're advising investors to focus on value based companies with near term earnings and yield, looking for alternatives and corporate credit and yield generation, although the bond market is looking a little bit more attractive with higher yields and then also, you know, being prepared like I said, to rotate into longer duration opportunities, whether that's in bonds or whether that's in growth stocks, but I think a recession is imminent and during recessions, you know, I think investors start to look instead of the near term, they start to look out in the long term for finding yield and finding, you know earnings, which is where that rotation, I think into growth and long duration will ultimately find itself all right, Jason thanks so much for your time and your insight this morning. That's Jason Ray, founder and investment director at Zenith Wealth Partners, which is, as I mentioned, an investment management and financial planning firm.