CNBC’s Closing Bell recently interviewed Peter Cecchini, the director of research at Axonic Capital, live on July 17, 2024, to discuss the economic landscape, market reactions to rate cuts and opportunities within the small-cap sector.
Cecchini emphasized maintaining a balanced portfolio amid economic slowdowns and labor market shifts. He highlighted that markets generally rally in anticipation of a Federal Reserve rate cut but warned this could shift if the cuts signal an actual economic slowdown, leading to a sell-off.
Despite the AI-driven narrative, Cecchini projected that the Federal Reserve will cut rates significantly by year-end. He also analyzed recent tech downgrades and the potential in small caps, foreseeing a sustained bull market driven by AI advancements.
“Typically, when the FED is deep into its rate-cutting cycle, markets tend to sell off. I don’t think we’re there yet. I do think it’s 3 to 6 months away. And our view is that until the end of the year, the FED is gonna cut pretty hard,” says Cecchini.
He also pointed out the underpricing of risk in the credit markets, noting a disconnect between high-yield spreads and rising speculative grade default rates. This mispricing presents an opportunity for outsized returns.
To learn more about how Axonic Capital’s strategies can help you prepare for these market shifts, please contact us.