Sam Stovall, Chief Investment Strategist at CFRA joins Cheddar News to discuss the markets. 

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Stocks Open Higher After Corporate Earnings Signal Slowing Economy 

Let's bring in SAm Stovall, Chief investment strategist over at CFR, a research SAm happy friday. Good to have you here, as I mentioned earlier, the dow negative territory right now looks like it's about to be in negative territory for the year so far. What's your sort of assessment on where things are at right now with the markets? Well, good morning. Yeah, I still think that the market is trying to figure out which way it should be going for this full year. I think it's going to be challenged in the first quarter, first half, as the Fed finally ends up hiking rates to what it believes will be an appropriate level. And I think as that goes on, However, the market will likely start to improve as the year progresses. You did mention about the Dow being down on a year to date basis. So I did a little number crunching and found on average, the S&P 500 has posted a year to date decline in 92% of all years since World War II. And because it's such a natural common thing to occur, if we do get the year to date low to occur anywhere between January and the end of August, the market has been higher for the full year, 90% of the time. So basically don't worry about a year to date decline. So early in the year. I want to get your take also on the comments made yesterday by Fed reserve Governor Lael Brainard essentially saying that interest rates need to remain high to cool down inflation. Is that going to be the expectation at least for the rest of the year here Sam that we're going to be seeing these elevated rates just to bring down inflation. Yes, the Fed has told us multiple times. It does not want to repeat the mistakes of the 19 seventies where rates were increased and then decreased. And so the market ended up in a whipsaw effect that did not have the desired effect on inflation. So while we do think the Fed is only going to raise one more time at the upcoming january 31 Dash Fed one Fomc meeting and do so by 25 basis points. We I think that it will then hit the pause button through the remainder of 2023 and only into early 24. Consider the first rate cut. So the Fed will at least go higher for longer, but not that much higher. Let's talk earnings season right now, because we've been sort of getting a little bit of a mixed bag from a lot of the banks right now, you say there's a possibility of an earnings recession in the period ahead. What sort of factors are leading you to believe this? Well, just looking at the raw numbers on a year over year basis. S and P capital I. Q. Consensus estimates are pointing to a 3% decline in the fourth quarter of 2022 followed by a 1% decline in the first quarter of 23 a nearly 3% decline in the second quarter of 2023. We know that two successive quarters of earnings declines equates to an earnings recession and essentially, any time we've had an earnings recession, it has traditionally been coincident with an economic recession. So our belief is that because of earnings declines, because of elevated interest rates and the possibility that we could see some employment weakness come the middle of the year, that maybe the N. B E. R finally tells us we were in recession for the first half of 2023. Sam just really quickly your take on the PP. I numbers we got this week, given the fact that those, that number declined 5/10 of a percentage point for the month, you know, much better than what economists were predicting, which was about 1/10 of a percent. That was the biggest drop we've seen, I believe since 2020. Your take on that. And is that sort of give us an indication that we might be seeing inflation start to ease here? Yes, it does. Whether you look at the CPPPPPC, or the GDP chain price index. All of those inflation measures are headed in the right direction with the peak having occurred in the middle of last year. Our belief is that they will continue to take stair steps down for the remainder of 2023 and that's why we believe the Fed will raise rates only one more time this year. Sam good staff Sam Stovall, chief investment strategist at research.