Sector Chart Pack: The Market On Economic Tightrope

The economy is not in a recession, and the Fed is not behind the curve. A 50 bp rate cut at the September meeting is unlikely, but 25 bp is certain. However, economic growth is slowing, and a recession at the end of the year is still the most likely outcome. The S&P 500 earnings are projected to grow, but our model predicts that the growth rate will roll over. The S&P 500 remains expensive and crowded, but the most extreme technical positioning across sectors has unwound. We recommend lowering portfolio beta with defensive sectors, and under-weighing Tech, and Consumer Discretionary.