This is Bloomberg daybreak. Let's jump into these markets now. STI Dwek Joins, us chief investment officer at Flow Bank, st good morning. We're seeing futures rise after the two days slide following Jackson Hole. Do you buy this dep Good morning? Um? I think I would. Um. You know, there's a lot of talk about this FED pivot that wasn't happening, but I don't think we were ever going to get an actual pivot. The market wasn't expecting the
FED to start cutting now or to stop hiking. The FED is clearly past the most aggressive part of his tightening cycle. We're probably going to get fifty basis points unless we get a really bad inflation number for August, which indicators don't seem to be pointing that way, and
then we'll have a couple more basis points. But we're moving intour into the end of the tightening cycle, and I think the FED needed to re anchor those medium to long term expectations, reaffirm it was going to keep fighting in lation because it felt the market maybe got a little too complacent over the summer. But I don't think this speech should be that much of a surprise and change the perspectives, and you can see you didn't see that much of a move in the bond market.
You're getting right into the heart of the debate, aren't you. Whether the Fed is going to pivot I guess to slower rate hikes. Dig a little deeper into your call here, Why do you think the Fed is going to start slowing down next month? We saw in the July minutes that they know it takes three to six months for the rate hikes to feed through into the economy. We started to see a couple of data points showing that growth is gradually slowing, although not yet so much in
the labor market, of course. And we're continuing to get these disinflation indicators. Hopefully August comes in lower than July, and again most of these indicators are pointing that way. One month doesn't make a trend, but to three four months in a row. If this continues into the end of the year, that gives a little confidence that inflation is coming down. And they need to let the big, big rate hikes that they did in the second and third quarter have an impact on growth, bring demand down
slowly and let that feed through into next year. I'm sure By now you've heard the comments to our Odd Lots podcast here on Bloomberg News from Minneapolis FED President Neil cash Cary saying that he was pretty happy with the market reaction following Chairman pal speech on Friday. He says, it's a sign that the message from Powell on higher for longer rates was received by markets. Is the market
sending a different message here? I don't think. Again, if you look at the bone market, you had more of a reaction before the speech, then after the terminal rate didn't change so much. The odds of seventy five basis points versus fifty for September went up, but they've sort of retreated already since. I think the Fed also wanted to send a message that the rate cut expectations that were coming in sort of early or in earlier in
three weren't going to happen. So I'm not sure it was so much about September or into the end of the year. I think it was a view that they are going to get restrictive, as we've already known, and they're going to stay restrictive for longer, and even if growth slows, it's kind of what they're hoping for. So they're not going to jump in at the first sign of a disappointing non farm peril's number or a softer
p m I number. They're going to stay tighter for longer. So, given all that you're saying here, I see in our last minute or so, how are you advising your clients to add to risk? Are you making a certain recommendations on sectors or styles through the rest of this year. Well, we think that technology is going to resume its out performance in the coming months and lead the market higher
into the end of the year. Now, it doesn't mean we don't get more speed bumps like we did just now, and September for sure, can be tricky at least at some point during the month. So it's not there's certainly no all clear signal, but some of these more some of the cyclical sectors should start to recover if growth holds up. And again I think technology growth and earnings are going to continue to support the sector and that will help lead the market higher. Great to get your
thoughts this morning, s D. Thanks for this. I really appreciate you joining us. That's s D. Dwack, chief investment officer at Flow Bank,