Oppenheimer Chief Investment Strategist John Stoltzfus joins Yahoo Finance to analyze market reactions following numerous hot inflation prints this week.

Stoltzfus says the volatility reflects "pushback" against premature interest rate cut hopes after the Federal Reserve's hawkish messaging. He notes the Fed has been "remarkably gentle" in lifting rates, aiming to cool inflation without sparking a recession. Given this gradual approach of eleven hikes and five pauses, Stoltzfus says mixed market reactions are "not surprising."

Despite the turbulence, Stoltzfus points out there is substantial money still invested in equities from both institutional and individual investors. Markets stay stimulated with "a lot of money floating around," Stoltzfus explains.

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

- Oppenheimer chief investment strategist John Stoltzfus. John, it is always great to have you on the show. And just help us make sense of this market, John.

So walking through this earnings season, it's been solid, John, relative to expectations. But then we also get this economic data, PPI, CPI. Retail sales, not so great. Help us make sense of it, John. Where do you think the market is now and where you think it's headed?

JOHN STOLTZFUS: Well, thanks for having me on the show, Josh. Always great to be on Yahoo Finance. I've got to say this.

When we look at it, really if we look at the earnings for the S&P 500 Q4, you've got three or four sectors with double digit earnings growth. At least three of those are cyclicals. OK. And technology, communication services, and consumer discretionary. And I think actually utilities is the only defensive double digit earnings growth.

Then on the other hand, your negative earnings growth is coming from materials, energy, and health care in that fourth quarter. And when you look at it, we would have to say the mixed bag in terms of inflation data hotter than expected. A reiteration in our view of the pushback that the Fed has been giving to the market, particularly the trading community and those much more leveraged who have been trying to get the Fed to pivot with looking to reduce rates five or six times initially starting in March.

Our opinion has been for a long time. When it comes to inflation, stickier than expected. Fed on target in terms of moving towards its target.

And with expectations, the Fed will likely not push the economy into a recession because it's being remarkably gentle considering that it's already been through 11 hikes and 5 pauses thus far in a cycle that began in March of 22. So the kind of numbers that we're seeing today, especially as a speaker before me just said with seasonality, volatility, and then a transitional time, when you're liable to get mixed reviews, so to speak, not surprising to us. And if anything, we'll stick to our guns here.

- John, it's Julie here. What's so fascinating to me is there are segments of this market right now. And you just heard us talking about some of them notably NVIDIA, or Supermicro, or even in Eli Lilly.

That feel like 2021, that feel like when cash was cheap, that there was a lot-- that people were just like throwing their stimulus checks into the market. And certain parts of it feel like that right now. What do you think that's a function of?

JOHN STOLTZFUS: I think it's a function, Julie, of we are now at higher levels than we've been that I can recall in the last 40 years of individual investors being exposed to the equity market. And at a time when jobs are relatively plentiful, even in a Fed rate hike cycle, that's been going on for just about two years now.

And so there's a lot of money floating around. And there's huge capitulation after 2022 when the bears negative PitchBook essentially was proved to be unfounded. Because nothing with the exception really of the direction of the market, which went down that year.

But a lot of the things they were looking for increased unemployment plunging earnings and revenue growth and an economy sliding into recession just didn't happen. And so you've got capitulation of the bears, the skeptics, and the nervous investors. And then I think a general feeling across the marketplace universe particularly with individual investors and institutions that serve individual investors that Social Security looks like problematic to the future, both for existing retirees, people planning on near-term retirement, and those with a long distance to go.

And where's the traditional face place that you find the better growth historically, it's inequities.