Stocks: There's a tug-of-war in the market, strategist says
LPL Financial chief global strategist Quincy Krosby joins Catalysts to break down the state of the market as the second quarter earnings season is underway.
"The fact of the matter is, we're in a period, in terms of seasonality, it's pretty dicey. Going into August it tends to be difficult. September could be difficult, particularly in this electoral season environment. But that said, we're going to have to pay attention to guidance. The guidance is going to be crucial because there's a tug-of-war in the market as to whether or not companies are going to need to trim their payrolls," Krosby explains. She believes that guidance this quarter will be "more crucial now than it was even two quarters ago, because there is concern of a cooling economy and now there's concern about the change in the direction of the election."
She notes that the labor market is "cooling," rather than "collapsing." She points to the bond market as an indicator of a recession, explaining that if yields drop too quickly, the economy is cooling too much. She adds, "if you do think that we're going into a deeper slowdown, you want to be in the bond market, you want to be in treasuries because those yields are going to come down even more... But we're not in that camp. We just see normal volatility." With the market "finding an equilibrium," Krosby believes the Federal Reserve will deliver an interest rate cut in September.
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