Ron Temple on CNBC’s Squawk on the Street
Lazard Chief Market Strategist Ron Temple appeared on CNBC’s “Squawk on the Street” on January 8, to share his perspective on whether the Federal Reserve is successfully engineering a soft landing for the U.S. economy.
“I think the Fed is pulling off the ‘immaculate disinflation.’ It is better than any of us could have imagined 12 to 18 months ago. This can be a story where demand can remain relatively strong, and supply grows with demand,” Ron observed. “Look at the U.S. jobs data from last week: 216,000 jobs added. Every month in 2023 an average of 225,000 jobs [added], yet inflation has gone from 9% in the middle of 2022 to 3% today. This seem to be working very well.”
Ron also shared his expectation that the Fed will indeed ease monetary policy throughout this year, despite suggestions from some economists that the continued strong employment data and resilient U.S. economy could dissuade the central bank from implementing rate cuts in 2024.
“I think the Fed will be cutting rates this year because inflation has come down so quickly. There is a lot of strength in the household sector, in the corporate sector, and coming into this rate hike cycle corporates had termed out their debt at very low interest rates, so it’s a very positive story. The consensus for earnings this year is 11% growth for the S&P 500. I’m a little more in the 5% to 8% camp on earnings growth which is still good, considering that we’ve had the sharpest rate hike cycle in 40 years,” Ron added.
The environment for M&A is also improving, Ron noted, as corporate actors begin to feel more certainty about economic conditions.
“In M&A activity, there are always a few factors that play into it – confidence, financing conditions, and valuation, and I do think we are setting up for a rebound. You’ve seen Lazard and a number of other investment banks talk about green shoots year to date, so I am encouraged that this is a good environment for corporate activity,” he concluded.