Now, I want to bring in Kevin. Nicholson
, chief investment officer at Riverfront Investment Group Global fixed
income kevin, welcome to the show. Thanks for
joining us this morning. What's your reaction to how
the markets have opened on this final day of trading
? Well this morning, the markets are reading the
tea leaves a little on positive. Um, I
think that, you know, the market's really are
based upon expectations and they're looking for when the,
there will be the end of the Fed rate hiking
cycle. And I think right now the markets have
adjusted to the fact that we're probably going to get
the Fed to stop raising rates uh in uh,
you know, the early part of summer, you
said, I wanna take it back to a couple
of months ago, you said that the early year
rally got a little bit ahead of itself. So
what's your prediction for the markets for the rest of
the month and for the short term in the future
here? Yes, I think that the market is
going to be range bound for the foreseeable future in
that 3800 to 4200 range. And the reason for
that, we had a very weak earnings season.
We only had 68% of the companies outperform beat earnings
expectations. And if you take that back uh,
for six months prior was only 42% of the company's
beat their earnings expectations from six months prior. So
we're, there's a much lower bar there were seeing
earnings expectations that operating earnings estimates come down uh,
over the last couple of weeks and they've been coming
down for the last couple of months actually. And
now we're seeing smp operating earnings estimates for 2023 at
$219.71. And we think that there's the potential for
them to get lower. Um And so from that
aspect, we don't see that there's going to be
more expansion. So that's why we think that we're
going to stay pretty much in this range here at
3800 to 4200. Yeah, absolutely. I want
to take it back to the Fed now. We've
got a lot of commentary from Fed officials. We
recently heard from Christopher Waller. We had the Fed
minutes out suggesting that participants were committing to this 2%
inflation rate. Now you've said that the Fed has
a lot of work to do if they're able to
come close to their 2023 forecast. So what's leading
you to believe this? What kind of work do
you think has to be done here? Well,
let's first start with the Core Pc. Core Pc
is running at 4.7%. Right now, we have
unemployment at 3.4% and in both instances, the Feds
end of the year for 2023 projections are 1.2% gap
there. So for um Core Pc either expecting it
to be at 3.5% and they're expecting unemployment to be
a 4.6%. Well we're nowhere near either one of
those and we continue to have substantial wage growth.
You look at the Atlanta Fed or wage tracker,
it's growing at 6.1%. So as long as people
are employed, they're going to continue to spend where
A nation of consumers and consumption represents about 69,
of our GDP. So as long as they run
, as long as they're employed, they're gonna spin
and that's gonna ultimately drive up demand and drive up
inflation. So I think that that leads the Fed
to have to do more than originally anticipated and that's
why we're so far away from their year in estimates
. All right, Kevin Nicholson, chief investment officer
at Riverfront Investment Group of Global Fixed income. Thank
you so much for joining us and for your insight
this morning baker, tossing it back to you.