CNBC’s ‘The Exchange’: The market has Backed the Fed Into a Corner, says Michael Landsberg

September 17, 2024

Michael Landsberg, Chief Investment Officer of Landsberg Bennett Private Wealth Management, joined CNBC’s The Exchange to discuss his thoughts on the Federal Reserve’s potential interest rate cut, the mixed reactions in the stock market to macroeconomic data, and his outlook on defensive investment strategies.

Landsberg expressed skepticism about a 50-basis point rate cut, emphasizing that such a move would signal an emergency and could indicate the Fed is seeing negative economic conditions that aren’t immediately clear to the market.

He highlighted a more cautious approach, favoring a 25-basis point cut and positioning portfolios accordingly in anticipation of continued lower rates.

Key Takeaways:

  1. Skepticism About a 50-Basis Point Cut: Landsberg argued against a potential 50-basis point cut, stating, “50 really doesn’t give us a lot of room here because what will happen is people are going to say what has the Fed been not telling us the whole time.” He noted that such cuts typically occur in emergency situations, which doesn’t seem necessary given current data.
  2. Market Reaction to Macro Data: Landsberg observed mixed market reactions to economic reports, particularly in relation to consumer spending and the potential for a significant rate cut. He expressed concern that larger cuts might signal underlying problems in the economy that are not yet apparent to investors.
  3. Rotation Toward Defensive Sectors: He highlighted a rotation into defensive sectors like utilities, real estate, and healthcare as a reflection of a slower growth environment and the anticipation of lower inflation. Landsberg pointed out that these sectors have performed well in recent months as investors shift focus away from high-growth, rate-sensitive sectors.
  4. Small-Cap Caution: Although small caps have seen a resurgence recently, Landsberg remained cautious, emphasizing that a significant portion of small-cap companies are not profitable. He suggested that this is a market for selective stock picking rather than broad exposure to the small-cap sector.
  5. Investment Strategy Amid Lower Rates: Landsberg explained his strategy of positioning portfolios toward defensive assets, including gold, insurance, and companies with strong pricing power. He noted, “We don’t see that inflation going down, and we want to be on the side that there still is inflation and pricing power.”
  6. Inflation Outlook: Despite inflation moderating, Landsberg believes that some areas of inflation, such as insurance and certain consumer goods, will persist. This outlook aligns with his preference for sectors that can maintain pricing power and perform well in inflationary environments.

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