In a recent interview with J.P. Morgan Asset Management’s Phil Camporeale, he stated that this is an extraordinary time to take risks in the U.S. stock market. With the upcoming inflation reading set to test the bull run of 2024, investors are eagerly awaiting clues on whether the economy is heading towards a soft landing.
Many investors are anticipating that the Federal Reserve will start cutting interest rates this year, as they appear to be winning the battle against inflation while keeping the unemployment rate low. The focus is now on the February inflation report from the consumer-price index, with traders hoping to gauge the timing of potential Fed rate cuts.
Camporeale believes that the Fed doesn’t necessarily need inflation to reach 2% in order to ease, they just need it not to worsen. Despite inflation falling from its peak in 2022, it still hasn’t reached the Fed’s target. However, recent data shows that the U.S. economy remains resilient, with job creation in February exceeding expectations.
The relationship between U.S. stocks and the bond market has become more nuanced this year, with Treasury yields influencing market breadth. Camporeale remains optimistic about the stock market, expecting a potential rate cut by the Fed in June. He believes that the U.S. economy is on track for a soft landing, with GDP expanding at trend levels and inflation gradually falling.
Overall, Camporeale’s outlook is positive, with a preference for U.S. large-cap stocks over small-caps. He expects the rally to broaden out and sees the economy avoiding a recession while inflation falls to around 2% by the end of 2024. The upcoming consumer-price index report for February is expected to show a deceleration in core inflation, easing concerns of a reacceleration.
In conclusion, despite recent market fluctuations, Camporeale remains confident in the U.S. stock market and believes that now is an extraordinary time to take risks. Investors will be closely watching the upcoming inflation report for further insights into the market’s direction.
