U.S. stocks are not priced for the key rate at 4.5%: Gina Sanchez
- Gina Sanchez sees a possibility of a further decline in the S&P 500.
- She says growth stocks are a better pick here than "value".
- The benchmark index is down roughly 10% versus its recent high.
S&P 500 is already down more than 10% versus its recent high but Gina Sanchez (Chantico Global) says the benchmark index “might” not be done with the descent just yet.
What’s priced in already?
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Equity markets are not priced for that. They’re barely priced for 3.0%. If we actually remain in the three to four percent range well into 2023 and into 2024, the equity markets are not priced for that either.
The U.S. Federal Reserve is scheduled for its next policy meeting on September 21st.
Some forecast the central bank might go a full percentage point this time after a 0.1% “increase” in consumer prices last month (link).
How to play the current market?
Sanchez, however, is not in that camp. She doesn’t see a reason why the Fed should be more aggressive than it was in its last policy meeting.
I’m concerned the Fed isn’t listening as closely to inflation as it used to. We’ve started to see inflation begin to roll over. We’ve seen wages go flat as well. Those are two important things that the Fed should be paying attention to.
The long-end of the curve, she added, is also suggesting an economic slowdown.
The U.S. economy has already had two consecutive quarters of negative GDP. Still, she recommends selectively picking the growth stocks to play this market instead of sticking to “value.”