BNN Bloomberg: Expectations for a Fed Rate Cut Next Week

September 13, 2024

Michael Landsberg, Chief Investment Officer of Landsberg Bennett Private Wealth Management, joined BNN Bloomberg to discuss his thoughts on a potential interest rate cut by the Federal Reserve, market rotation, and investment strategies amidst slowing economic growth.

He expects a 25-basis point rate cut, noting that such moves typically signal concerns about the economy. Landsberg also discussed recent trends in sector rotation, highlighting a shift toward more defensive sectors like utilities, real estate, and healthcare.

He emphasized the importance of rebalancing portfolios, particularly after the strong performance of technology stocks, as he expects a slower growth environment going forward.

Key Takeaways:

  1. Federal Reserve’s Interest Rate Cut: Landsberg anticipates a 25-basis point rate cut by the Federal Reserve, commenting, “We think they’re going to be very slow and steady with these cuts simply because you don’t want to spook a lot of investors that maybe the Fed sees some things the rest of us don’t see.” This reflects a cautious outlook toward economic growth.
  2. Market Rotation to Defensive Sectors: He noted a recent shift in market focus away from high-growth sectors toward more defensive ones like utilities, real estate, and healthcare. This shift aligns with a slower economic environment and lower inflation rates, which typically favor such sectors.
  3. Small-Cap Caution: Landsberg expressed skepticism about small-cap stocks, stating that “40% of that index doesn’t make any money,” indicating a cautious approach to this asset class, given its underperformance over the last three years.
  4. Rebalancing Portfolios: Landsberg stressed the importance of portfolio rebalancing, particularly after significant gains in the tech sector, saying, “We want to rebalance or take exposure down when it’s outperformed and look for other places to allocate.” This highlights his strategy of diversifying investments away from overperforming sectors like technology.
  5. Economic Outlook and Slower Growth: As inflation has come down and growth slows, Landsberg believes that investors should consider diversifying away from AI-focused investments, which have shown significant gains. He acknowledged the long-term potential of AI but emphasized the importance of balancing portfolios to reduce risk in volatile markets.
  6. Investment Strategy: The overall approach centers on maintaining a defensive stance amid a potential economic slowdown, with a focus on sectors that offer stability and consistent earnings growth. Landsberg’s strategy of trimming tech exposure and reallocating to other sectors reflects this cautious yet diversified investment philosophy.

Landsberg Bennett is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC (member FINRA and SIPC). Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

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