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Well, the latest data, including April's flat retail sales data, fueled immediate speculation about when the Federal Reserve might lower interest rates. Current market sentiment, reflected in Fed Funds Futures trading, now suggests a 75.3% probability of a rate cut at the September Fed meeting, according to thethis year, starting in July. Excluding lagging components from the Consumer Price Index, such as housing, auto insurance, and medical insurance, Shue argues that inflation is"running at below 2%," the Fed's target.
"We think this gives the Fed cover to start cutting rates earlier than the market expects," Shue explained to CNBC's"Money Movers.""We think the first cut will come in July and three cuts this year. That plays in nicely for small caps, which are more rate-sensitive, but just in case we are wrong we are also in U.S. large-caps, which to some degree is a little bit of a hedge.