As market indexes hit record highs, consumers shouldn't get "ahead of their skis", Providence Financial & Insurance Services President Anthony Saccaro tells Yahoo Finance Live.
Saccaro notes that while markets are already betting on the Federal Reserve to initiate interest cut rates soon, officials are still heavily considering the trajectory of inflation. Though other factors have maintained resiliency for equities, Saccaro worries some may think "the stock market is going to go up no matter what" or even view it as a "safe haven." However, he stresses that's a mistaken assumption.
While inflation has steadied, Saccaro says he would "love to see it come down" further, though the data doesn't indicate significant declines just yet.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Angel Smith
Video Transcript
AKIKO FUJITA: Our next guest says the current economic landscape presents a Goldilocks scenario, but he warns about complacency kicking in. Let's bring in Anthony Saccaro, Providence Financial & Insurance Services president. Anthony, good to talk to you today. So talk to me about the landscape you're seeing right now. What's the concern here about investors getting a little too complacent with how things are?
ANTHONY SACCARO: And it certainly is all about the inflation numbers, which the inflation numbers then trickle back to the interest rates. And the stock market has presumed that the Federal Reserve is going to raise interest rates in March. And that's pretty much almost off the table at this point.
And you would almost think that that would be negative for the stock market, but then corporate earnings have been so strong, and consumer spending is still up, and the labor market is still strong. That the stock market has reached new record levels despite the fact that the Federal Reserve's probably not going to lower interest rates nearly anywhere as much as they were anticipated to at the beginning of the year.
What consumers I think-- the concern that I have is that consumers might be getting a little ahead out of their skis. We get to a point where we start to feel like no matter what, the stock market's going to go up. And there are a lot of consumers out there that are believing that the stock market is a safe haven. It's almost like the new safe asset class, and it will always go up, and that's not the case.
There are long periods of time, decades where the market has been flat. And those periods of time are followed by good decades, like the last 13 or 14 years when the market's been up double digits. So I don't want you to get out as a consumer over your skis and get hit if we do get into another major recession, or we have another decade of flat growth, not anything like the last decade.
AKIKO FUJITA: Certainly, a lot of focus is going to be on earnings, but it does still feel like it is Fed policy that's going to be the big driver in the markets. We've got inflation data coming out this week. What's the sweet spot you're looking at right now that will give investors confidence that things can push a leg higher even if the Fed isn't necessarily going to cut rates until later this year?
ANTHONY SACCARO: Well, interest rates-- or rather inflation are currently at 3.3%. I think it stays in that level and it doesn't vary too much from there. That's going to be where we need to be. We'd love to see it come down. The data doesn't seem to show that it's going to come down. Year-over-year, yes. Month-over-month, no. But it does-- if it stays in that area.
I think the surprise to the upside could spook the market. That could be a problem and cause stock individuals to-- stock traders to want to go somewhere else, to more of a safe haven. And with the yields still as high as they are, that they actually have an alternative. That's something that two years ago, we did not have, the stock market didn't have. So I think that would be the sweet spot when it comes to inflation.