On October 27, 2023, Tony Pasquariello, Global Head of Hedge Fund Client Coverage at Goldman Sachs, spoke with Scott Wapner about his market expectations, the Federal Reserve's potential interest rate hike, and recent reports from technological results.
Pasquariello noted that investors are currently cautious due to the fragile geopolitical landscape and the behavior of the bond market. He also mentioned that technology earnings have had a significant impact on the market, but clarified that the overall quality of the quarter's earnings was satisfactory. He stated that the market reaction to tech stocks was influenced by broader risk factors and that companies that did not revise upward their 2024 guidance faced market penalties.
Pasquariello expressed hope that bonds and yields are in the process of peaking. He suggested that a slowdown in growth could ease the rates market, allowing the stock market to breathe easier. He emphasized that the back end of the bond market is where investors have been most nervous.
When asked about possible market catalysts for the rest of the year, Pasquariello pointed to strong, but not too robust, growth as a positive factor. He mentioned that if growth slows down a bit, it could lead to a more favorable environment for the market. He also highlighted that market sentiment is currently quite negative, but he expects corporate bidding to be strong in November and December.
Looking ahead to the Fed's upcoming FOMC meeting, Pasquariello believes the Fed is likely to have ended its current rate-hiking cycle. He noted that market support since the summer has been equivalent to about 75 basis points of rate hikes, which could be appropriate given the strength of the economy.
In a recent appearance on CNBC's โSquawk Box,โ Raphael Bostic, president of the Atlanta Federal Reserve, discussed several economic topics, including the contrast between public sentiment and economic data, his perspective on Federal Reserve policy and the current state of the economy. . Bostic acknowledged the complexities of the current economic environment, citing factors such as fluctuations in inflation rates and a broader, more robust economy. He highlighted the need to focus on future economic projections.
Bostic noted that his interactions with businesses have led him to anticipate an economic slowdown. He takes these real-world observations seriously and integrates them into his economic analysis. Given this response, Bostic revealed that he does not foresee the Federal Reserve reducing interest rates until at least the middle of next year. He added that his colleagues share similar concerns about a looming economic slowdown and that the full impact of policy tightening has yet to be felt on the economy.
Regarding the issue of inflation, Bostic highlighted that the current rate stands at 3.7%, well above the Federal Reserve's 2% target. Controlling inflation is a top priority, he emphasized. Despite anticipating an economic slowdown, Bostic clarified that he does not expect a full-blown recession.
Regarding recent comments from Federal Reserve Chair Powell, Bostic indicated that the committee is taking a โwait and seeโ approach. He warned that signaling policy easing could be risky, especially given that the inflation rate remains well above the target.
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