Octavio Marenzi, CEO of Opimas, joins Yahoo Finance Live to dissect shifting rate cut expectations. He says "all eyes are on the Fed [Federal Reserve] and what they're going to do," but with March odds fading given recent data, "I don't think it's a very strong case for the Fed actually cutting rates at all in March."

However, Marenzi notes timing is secondary, as the Fed usually sticks to a direction "for an extended period of time" of 12-18 months once they move. Though geopolitical tensions loom, he doesn't believe they will "weigh into the Fed's decision" with the US economy largely "isolated" from those events. Still, he points to Gold (GC=F) as an attractive investment given those concerns.

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

- The S&P 500 is pushing higher today, after hitting all time highs last week. Even as chances of a March Fed rate they dropped, or Fed rate cut, I should say, they dropped to less than 50% according to the CME FedWatch tool. So as the debate on when the Fed will cut rates rages on, where can you invest to hedge your bets? To tell us more we've got here, live in living color, in studio, Octavio Marenzi, Optimus CEO. Great to see you in person after so, it's been a while.

OCTAVIO MARENZI: It's been a while, indeed.

- Indeed. So

OCTAVIO MARENZI: It's good to see that you're real people.

- I mean, you chose the best time, right? We've got all time highs for the S&P 500. I mean, if you're an investor looking at this market environment right now and have to also pair this with the rate cut probability as of right now, what should be going through your mind? What should be top of the docket for any of your portfolio strategy?

OCTAVIO MARENZI: Well, I think all eyes are really on the Fed right now, and what they're going to do. Not this next rate meeting of the FLMC, but the one that follows on in March. What are they going to do there. And I think the consensus for some time has been now they're going to cut 25 basis points or 50 basis points, and now that's starting to look less and less likely. So that's not a melt like a snow in the sunshine, and basically saying, where are we going to go now, what is the Fed going to do?

Now, I think if you look at the Fed and the data that they look at, and the markets, and where the economy stands, and where unemployment stands, you put all those things together, I don't think there's a very strong case for the Fed actually cutting rates at all in March. I think quite the opposite. They're just going to look at it and say, inflation is coming down slowly, it's more stubborn than we'd liked. The last core inflation reading was 3.9%.

Unemployment is low. The economy is doing well. Markets are at record highs. Why would we cut rates now? Does the market really need another boost from the Fed? It doesn't look like it does. So I think, I think this will embolden the Fed to do nothing and just wait. And I think we'll see the chances that there's nothing happening go up above 50% as we get closer to the date.

- Octavio, how much of that first rate cut, how much does that really matter to the markets here? In terms of is some of that hype been a bit overblown, and then when you put this in perspective in terms of the pace of cuts, should we be putting a little bit more weight into that rather than the timing of that first rate cut?

OCTAVIO MARENZI: I think that's absolutely the right question, is how much are they going to cut over what period. And the Fed tends to, once it starts moving in one direction or the other, either increasing rates or decreasing rates, carry on moving in that direction for an extended period of time. So they tend to move for 12 months, 18 months, in the same direction, as they adjust for interest rate policy. So you're absolutely right to point out when exactly that starts is not so important perhaps.

But if inflation stays high, and if the economy carries on doing really well, and employment remains low, I think they'll postpone that further and further out, and we might end up waiting a long time indeed. Now, I don't know when that's going to happen. I wish sometimes that the Fed would share the econometric models with us since they're a public institution they could share all their data and their models with us, and they could all figure out for ourselves when they're going to cut rates or increase them.

- And then we could be our own dot on the dot plot. Why not.

OCTAVIO MARENZI: We could indeed. We could indeed.

- And so, I mean, all that considered, there's also the international conflict that a lot of people are trying to figure out how does that factor into our economy here in the US, and will that weigh into the Fed's decision at all.

OCTAVIO MARENZI: I don't think that will weigh into the Fed's decision the geopolitical context right now. I think the US economy is mercifully isolated from that, except for the oil side, so that could be a big impact there. But I think in that geopolitical uncertainty, we've tended to overweight gold a bit and say that looks like a good investment, a good place to be.

We did see gold have a nice run up over the course of the past few months since late October, as a result of these hopes of interest rate cuts as well, I think, more than anything else. But I think given the geopolitical context, it looks like a good investment again, potentially over the course of the next few months.