Hawks, Hikes and High Bars

Jack Janasiewicz and Brian Hess discuss inflation, the May Federal Reserve meeting, earnings season and current positioning in the Natixis model portfolios.
- Stock market volatility in April broke the trend in place since late October 2023.
- Inflation prints for January, February and March came in worse than expectations - but there were nuances to the data that are significant.
- There are three components driving the stickiness in inflation: housing, medical care and car insurance.
- But none of the three are necessarily demand-driven - so hiking interest rates may not be particularly effective in bringing these particular line items under control.
- In his comments following the May FOMC meeting, Chair Powell specifically avoided mentioning rate hikes, but he did reference the Fed’s dual mandate of both price stability and full employment.
- Hiking rates could potentially cause collateral damage to the labor market - and the Fed seems cognizant of both the risks to the upside and the downside in terms of potential rate moves.
- We’re in the midst of earnings season now and while headwinds to growth are always a concern for the market, earnings have been better than expected - not fantastic, but not bad.
- The Natixis model portfolios continue to be overweight equities and have begun to add small and mid-caps to the large cap equity mix.
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