U.S. stocks closed near session highs on Friday, marking the fourth straight positive week for the S&P 500 and Nasdaq, as investors continued to monitor positive inflation-related data released this week. For the week, the S&P 500 added 3.25%, the Dow rose 2.92%, and the Nasdaq gained 3.08%. Angelo Kourkafas, an Investment Strategist at Edward Jones, joins Cheddar News' Closing Bell to discuss.

Closing Bell

U.S. Stocks Close Near Session Highs

let's turn back to the major indexes joining me now. Is Angelo cork cork office? I hope I got that right. Angelo investment strategy strategies to the financial services company Edward jones Angelo, it's great to see you on an intraday basis docks and Dean Miller session high strong gains across the board. What's your take on the market action? Yes. Good afternoon. As you said, very strong, weak. The Fed get a welcome break this week. And so did the markets with both the C. P. I. And the PP. I. Coming in below expectations, basically better than fear, which suggests that the taking inflation is close and probably the worst might be behind us. Uh So the narrative of the pig's head and fake inflation has helped improve a risk sentiment and that's what we've seen. So it's certainly the positive data points continue to come in. Angelo. Are you betting that this is more than a bear market rally that we might actually continue to rise in the stock market? Yes, there's multiple paths that the markets can take from here. It's certainly encouraging that we have seen Thinking about the two big risks this year has been persistent inflation and the Fed that might push the economy into recession. And both of these risks have subsided recently. Of course we shouldn't forget that before the september Fed meeting we still have another jobs report and another inflation reading before Fed officials can decide what happens next. We don't think the coast is clear. The markets could be entering a shopping period where they are range bound but certainly this move higher is encouraging and has has boosted sentiment. Uh we think that there is still elevated recession risks are elevated. However, even if we get into a session that probably is gonna be a mild one and we have seen a lot of evaluation adjustment lower already. Um, So we did have some sales guidance, disappointing sales guidance from some of these chipmakers this week. Angelo as we've been covering here on closing bell, they did turn it around toward the end of the week. But gathering the data that we know seeing the stock market reaction, do you think that the market is fairly priced here? Do you think that corporate America is holding up so far? We have seen both economic data and corporate profits hold that better than field. They have not been perfect but good enough to drive the markets higher. I think on the valuation front, valuations have already created. I don't think there's much more to go on the earnings front. I think what we've seen is that profits remain the Brazilian, especially for this year. The analyst estimates are likely continue to be supported for 2022. As we think about next year's earnings that 2023 numbers there, we might see some more downward revisions to reflect the more challenging macroeconomic backdrop. But however, so far it seems, I think it is fair to say that companies have been able to pass through price increases and protect somewhat the profit margins as it relates to some of the adjustments that we've seen talking about the semiconductors. I think part of the story is related to this normalization of the economy as consumers. We went, we spent on goods and now and spending is shifting back to services and a lot of these areas that benefited the last year and a half are now seeing some some payback if you will. And I think that's that's the case here. So do you think it's a blip and inflation? I mean it's it's clear right that lower gas prices helped both companies and consumers in this latest report in the month of july gas prices down for seven straight weeks below $4 a gallon on average at the pump for the first time since March. These are all positive data points Angelo. But do you think it's just a blip, no doubt the story with the decline in gas prices and energy prices in general has been a big relief. Uh if we segment inflation into two components, inflation for goods and inflation for services, I think it is pretty clear that inflation for goods is going to continue to come down and pretty pretty meaningful. E commodity prices are lower. We have seen a clear moderation in demand For goods and and the fact is acting is tightening, which should continue to suppress demand plus, as I mentioned, we have seen the normalization of the economy with spending shifting back to services now as we think about the other component with these services, services, inflation tends to be more sticky and that's what's gonna hold up a bit, inflation is going to be a slow path of moderation. We don't think we're going back to the 2% target anytime soon either. We look at wage pressures, they remain high and then center the rent of center is a very slow moving component on on inflation. We know the housing market is cooling in response to the surprising borrowing costs. However, it's gonna take a while until it shows up in the data, I think more volatility but the trend is lower in terms of the inflate. Yeah. Okay, so as an investment strategist Edward jones Angelo, how would you rate us stocks versus international stocks? Is crypto something you're interested in that you think might be an investment opportunity here and our specific sectors that you would recommend to your clientele that investors take a look at. Yes, let's start with the regions I think it is uh pretty clear that there is more downside pale risks for europe specifically than abroad. So on that sense, the U. S. Is a little bit more insulated from these geopolitical risks. So a slight preference for for for domestic equities. Uh now as we think about sectors, we think a balanced approach makes sense here with some barbell approach, some exposure to growth and cyclical at the same time. Also some defensive sectors, we like industrials, we like healthcare, which has some both growth characteristics and defensive characteristics at the same time. And then within the defensive sectors will prefer staples over utilities because of valuations. So these are some ideas. And then at the style uh level, let's say we we think that as economic growth weekends, as inflation falls, there's maybe less of the case to be over with value over growth. But the same time, relative valuations remain very elevated, meaning that we have seen some opening in growth style investments but not not enough. So we have a slight overweight to value, but less so we prefer the style less so than we did four months ago. Alright, Angelo Cork Office investment strategist at Edward jones. Angelo, thanks so much for joining us this afternoon.