The February Consumer Price Index (CPI) reading was released on Tuesday, moderating expectations of rate cuts in the near term. Mahoney Asset Management CEO Ken Mahoney joins Yahoo Finance to discuss why he believes those wishing for interest rate cuts on Wall Street should be cautious in rushing the Fed to make its policy decisions.

Mahoney advises that investors focus on "growth companies" amid "one of the biggest capital expenditures" in market history: "Be careful what you wish for. Remember, end of October, we had that spooky month because we were talking about keeping rates higher for longer, that's what they told us. Then it capitulated about a week later, following the bond markets, the way we look at it, and said, "Oh, forget about that higher for longer, probably cutting rates in 2024." And then it was like a bidding war...Listen, the last thing in the world you want is six rate cuts because that's accompanied with slower growth. I think in this goldilocks environment right here, believe it or not, because we have great earnings — headwinds, no doubt, are there, always somethings you have to deal with. But be careful what you wish for. If you have three, four, five, or six rate cuts in this year, 2024, from where we are now, yeah, wouldn't like to see what the economic numbers were to precipitate that."

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

RACHELLE AKUFFO: Well, we're looking at inflation data coming in hotter than expected this week, still well above the Fed's 2% target, moderating expectations of rate cuts coming anytime soon. Now our next guest thinks we should be careful of what we wish for. For more on this, Mahoney Asset Management CEO Ken Mahoney is here with more. So for people who are wondering here, it's not just about the rate cuts. It's why the Fed would be cutting the rates. Break that down for us.

KEN MAHONEY: Right. Be careful of what you wish for. Remember, October was at-- end of October, we had that spooky month. And-- because we're talking about keeping rates higher for longer. The Fed told us and then capitulated about a week later following the bond market, the way we look at it, and said, oh, forget about that higher for longer. We'll probably be cutting rates in 2024.

And then it was like a bidding war. I got three rate cuts. I got six rate cuts. Listen, the last thing in the world you want is six rate cuts because that's a company with slower growth. I think we're in this Goldilocks environment right here, believe it or not, because we have great earnings. The headwinds, no doubt, are there. There's always some things you have to deal with.

But be careful of what you wish for. If you have three, four, five, or six rate cuts this year, 2024, from where we are now, yeah, we wouldn't like to see what the economic numbers were to precipitate that. So, anyway, I think maybe get two, but be careful of what you wish for here with all these many rate cuts.

AKIKO FUJITA: Ken, I'm surprised to hear if there's anybody out there that are still calling for six rate cuts, given where we are with the economic data coming through. But we're still looking at a potential for a June rate cut. With that in mind, what do you do with your portfolio?

KEN MAHONEY: All right, so I think that they do cut in June. It's kind of insurance. I think they knew when they're raising rates, the first part of it, 11 times, they raised rates, and then maybe take a couple back to make sure we can balance out and so forth. You know, I think too many people are getting hung up with the economy. Again, of course, we have to look at GDP. We have to look at inflation. We have to look at rate cuts.

But right in front of us is one of the biggest opportunities we've seen. I mean, really, it's a tale of two markets. It's technology and everything else, and it reminds me in mid 1990s when the birth of the internet, we all ran out to PCs. What investors don't see here, unfortunately, in their own naked eye, they don't see the servers. They don't see, like, warehouses of servers being bought. It's not that tangible. But what we're seeing is probably one of the biggest capital expenditures in the history of the market.

So, I say that, really important that don't get caught up with how many rate cuts the Fed's doing. You know, again, really focus on some of these growth companies that you can make significant progress with. And that's kind of our forte is, again, we are growth managers. We certainly want to stay away from falling tops and doing all these type of things in front of us. We have a really nice runway to make some good money.

RACHELLE AKUFFO: And we're still seeing this bull market continue. Obviously, some jitters around some of the inflation data that has come out. But when you're looking at Q1 earnings being the next catalyst, what are you looking for in that that's really going to give us a better idea of how investors should be looking at what's going to be happening in the next few months?

KEN MAHONEY: Right, so we look for those companies or playbook every earnings season. And this one, March 31st, and they'll start reporting third, fourth week in April, is kind of buy those companies that beat and raise guidance. And that's if you follow that money that way, you'll see all these big moves from Meta. Remember, Meta had so much in earnings in the December quarter that they ended up buying $50 billion worth of stock. So, a lot of good things happen.

So, here's what happens. They beat, they raise guidance. Wall Street or analysts go from holds to buy or buy to strong buy, $110 targets, $160 targets. You get all that good stuff. By the way, just the opposite-- stay away from those companies who miss. I know it's tempting because stocks go lower that miss and then guide lower. You're in quicksand. You're missing an opportunity.

So, I think this quarter, which will end March, I think it's going to be great for technology shares. And I think we're still continue to prove that we're in the early innings of it. By the way, the CEO of NVIDIA said, we're in a second or third inning, so we still got a long runway here. But again, I suspect this first quarter's earnings are going to be very strong, especially for big tech.

RACHELLE AKUFFO: We'll certainly wait to see what that seventh inning stretch looks like when we get to that point. Appreciate you joining us. Ken Mahoney--

KEN MAHONEY: [INAUDIBLE]

RACHELLE AKUFFO: --Mahoney Asset Management CEO. There you go.

KEN MAHONEY: Right. Take care.