Jack Janasiewicz and Brian Hess discuss earnings estimates, growth expectations, rate cuts, the Magnificent 7, and positioning in the Natixis model portfolios.
- The earnings outlook has seen a fishhook effect with no significant revaluation of earnings estimates. Typically, they drop somewhere between 8% and 9% but have only come down about 4%.
- The Fed is basically signaling the all-clear sign for a potential rate cut in September, but we aren’t there yet as the growth backdrop may be slowing.
- As for the Fed’s dual mandate, the unemployment rate has moved back above 4%, up about 60 basis points off its lows, and there is more disinflation on the wages front. However, inflation is lowering.
- There have been a fair number of price cuts within the retail space, so the margin backdrop bears watching to see if compression sets in.
- The Natixis model portfolios went back to neutral stocks vs. bonds, which had been overweight equities. Overweights in small-caps and mid-caps were eliminated in most models and went back to underweight developed international stocks.
