Скачать или смотреть Market rally faces a critical test

Stocks sit near record highs, but inflation and Fed policy could decide if this rally will continue.

Transcript:

CAROLINE WOODS: Joining me now, Kevin Mahn, President and Chief Investment Officer at Hennion & Walsh Asset Management. Kevin, thanks so much for joining us.

KEVIN MAHN: It's my pleasure to be here.

CAROLINE WOODS: So Kevin, we've seen this huge rebound since the tariff tantrum back in April. Stocks really sitting near record highs. As you think about the rest of the year, can the momentum continue?

KEVIN MAHN: Yeah, you think about it — the year didn't start off so well, did it? Through the first 73 trading days of 2025, the S&P 500 was down by 10.2%, the fifth worst start on record. So as a portfolio manager, I thought, well, what happened in those four other times? And that's where the silver lining could be found, because in those four previous worst starts, from day 74 through the end of the year, the market was higher every single time by an average of 23%.

And it looks like that is the case again this year, because from day 74 through the end of the second quarter, the market's up 21%. So that makes me now question: how much longer can this last? When are we going to start to see volatility again? And are there still growth opportunities ahead? I think there will be more short-term bouts of volatility, but I think there are still growth and income opportunities ahead. Investors are just going to have to be a little bit more selective to find them.

CAROLINE WOODS: OK, so we're going to dig into some of those opportunities in just a second. But talk to me — aside from just seasonality and history being on the market’s side, what are some of the catalysts that could continue to push this market higher? Because right now it's very much expecting Fed rate cuts starting in September, based on what we heard from Fed Chair Powell. Is that priced in, or is that a catalyst still?

KEVIN MAHN: I still believe two rate cuts this year are priced into the market. I've given up trying to play the Fed guessing game — I've been doing this for 32 years. Right now, it's an exercise in futility. But if I go back to their June meeting, the last time they updated their dot plot and released their summary of economic projections, at that time they told us they're still expecting two rate cuts of 25 basis points each.

They believe unemployment will increase to 4.5% this year, economic growth will slow to 1.4%. So if that's the case, well, then they should have been cutting already back in June. However, they also increased their forecast for inflation because of the unknown nature of tariffs. That's what's kind of kept them in this holding pattern thus far.

But given the outlook for unemployment, that concerning jobs report that just hit the tape last week, I think that 25 basis point rate cut in September is now baked into the market. And if we don't get it, then expect some volatility.

CAROLINE WOODS: So expect volatility if we don’t get it. But if we do?

KEVIN MAHN: No rally — I think we already had the rally coming off of last Friday when Chair Powell sounded slightly more dovish in that Jackson Hole speech. So I think that's already baked in. On the other side too, and a lot of people aren’t talking about this, but if their first interest rate cut is 50 basis points, you may see a rally, but not for the right reasons. Because then the Fed is basically confirming that, yep, we're late to the party once again, and the economy is much worse than we originally thought.

CAROLINE WOODS: Coming into the summer, we have the Fed's preferred inflation gauge, core PCE, on Friday. If that comes in hot, what could that mean for the market?

KEVIN MAHN: Well then I think you're going to see volatility come even sooner. Because then the 84% probability of a rate cut that the bond market believes right now in September may start to drift lower, back into that 50% range — in other words, a coin toss. But I think it's going to come in line with expectations. And I think the market will just trade where it is. And now we start looking ahead into September and waiting for that next FOMC meeting.

CAROLINE WOODS: What about earnings as a potential catalyst? Because we do still have Nvidia coming up tomorrow.

KEVIN MAHN: Earnings have been good in the second quarter. About 81% of companies beat on earnings and revenue. I believe we have a year-over-year earnings growth rate now nearly 12%. That would mark the third consecutive quarter of double-digit earnings growth. And then we have the big kahuna coming in this Wednesday after the close — that being Nvidia.

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