In a recent interview, Phil Camporeale, a portfolio manager for J.P. Morgan Asset Management’s global allocation strategy, stated that this is an extraordinary time to take risks in the U.S. stock market. With the upcoming inflation reading set to test the 2024 bull run, investors are eagerly awaiting clues on whether the economy is heading towards a soft landing.
Many investors are anticipating that the Federal Reserve will start cutting interest rates in 2024 as they appear to be winning the battle against inflation, despite the low unemployment rate. The focus is now on the February inflation report from the consumer-price index, with traders looking for signs of potential Fed rate cuts.
Camporeale believes that the Fed does not need inflation to be at 2% to ease, they just need it not to get any worse. Despite inflation falling from its 2022 peak, it has not yet reached the Fed’s target of 2%. However, Camporeale remains optimistic about the market, stating that the current environment is conducive to taking risks in the U.S.
The recent employment report showed stronger job creation in February, but with cooled wage growth and revised lower payroll gains from previous months. Camporeale sees this as a positive sign, as slower wage growth and moderation in job gains help relieve inflationary pressures.
Overall, Camporeale expects the U.S. economy to avoid a recession, with GDP expanding at around 2% and inflation falling to around 2% by the end of 2024. He anticipates that the Fed will gradually lower rates this year, leading to a soft landing scenario where inflation does not accelerate.
In conclusion, the U.S. stock market ended lower on Friday, but the S&P 500 remains up more than 7% for the year. Camporeale remains overweight on equities, with a preference for U.S. large-cap stocks. As investors await the February inflation report, the market is poised for potential rate cuts by the Fed in the coming months.
