Fed rate cuts always lead to stock-market gains — but this one thing must happen too, veteran Wall Street strategist says

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A look at past Goldilocks environments shows good results for the stock market.

It’s way too early to proclaim a Goldilocks environment, even if major asset classes are at least pointing to a better chance of it. The S&P 500 SPX has gained 5% this year, and the tech-heavy Nasdaq Composite COMP is up 8%, even with a seemingly daily stream of job-cut announcements. Stay tuned Thursday to a barrage of economic data.“The... It’s way too early to proclaim a Goldilocks environment, even if major asset classes are at least pointing to a better chance of it.

“But for the stock market to produce such impressive results, the economy needs to avoid a hard landing. Otherwise, the probabilities favor lower prices sometime over the months ahead. Given this binary situation — recession or no recession — it is understandable why market participants are so fixated on the macroeconomic data,” he says.

Joshi advises remaining defensive on a six to 12 month horizon, by overweight bonds to stocks, healthcare versus technology, gold versus oil, and the Japanese yen versus the euro. And he said Feb. 15 will be a crucial date — when the next retail sales report comes out. The buzz Fourth-quarter gross domestic product data is due, alongside weekly jobless claims, durable-goods orders, the advanced trade in goods report and after the open, new-home sales.

 

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