Market needs reassurance to go higher: BlackRock strategist

After the Federal Reserve kicked off its rate-cutting-cycle sending the market (^DJI,^GSPC, ^IXIC) higher, Kate Moore, BlackRock’s global allocation fund head of thematic strategy joins Josh Lipton and Julie Hyman to discuss what Wall Street needs to see for stocks to continue to climb. Moore tells Yahoo Finance that there are three things that the equity market is looking for to catalyze new growth: earnings, payrolls, and macro policy. “This is a really important story in the third quarter. Not because the actual earnings growth is going to move the market, but because there was a big disconnect in the second quarter between revenue growth and the bottom line, companies were having to pull a lot of levers and do a lot of things to deliver on the bottom line. And I think there is some skepticism like, can they continue to do that quarter after quarter? Or is revenue growth going to stabilize?” Moore adds, “There’s a lot of expectation for the fourth quarter. So we’re watching guidance very, very closely. Do companies reaffirm what they have, or do they take down things at year-end? So I think earnings is huge.” All eyes will be on next week’s payroll print amid concerns about labor market weakness driven by the supersized cut. Moore says, “The labor market has been holding up pretty well. But the determination about where we go from a policy perspective will really come from, you know, whether or not there’s a deterioration in the labor market. So I think the labor market is super important.” Moore says what she’s calling the “macro-political,” the “back and forth on policy.” She explains, “It’s not just the geopolitics, but also the discussion in the U.S. ahead of policy changes in 2025.” The strategist notes, “It is very typical in a presidential election year, in particular companies to hold off on CapEx in the back half of the year. They front-load all the necessary stuff, and they wait and see and wait and see. But then by the end of the fourth quarter, especially if [there is some level of certainty around] a presidential candidate or an elected official, and then you know what Congress is going to look like, they’ll start talking about their next year’s plans.” Moore says she’s “not sure that’s going to happen this year,” given the uncertainty around the election outcome. “I suspect we’re going to have an even longer delay before we reignite the discussion around CapEx, because there’s going to be a lot of uncertainty even into the beginning of the new administration, but investors are doing the same thing. They’re kind of sitting on their hands a little bit, like there’s not a huge amount of momentum around any specific trade.” She says while major indexes have climbed to fresh record highs after the rate cuts, it doesn’t feel “super inspired. It’s on not particularly high volumes.” “The real game -changer would be if we got confidence that the labor market was going to stay very strong and the Fed said, ‘Don’t worry, we’re going to continue to trim because we feel confident on the inflation side.’ We had some clarity on the policy side and everyone could kind of breathe a sigh of relief and say the uncertainty factors are out and actually corporate fundamentals are good. I mean, I believe they’re good, but I’d say the belief is a little bit mixed given these multiples.” Moore says the message from the Fed was not incredibly clear. “The one thing that is clear is that data dependency is still really important and that the Fed is going to do its absolute best to be apolitical and focused on the data, and that’s what we should expect.” She adds, “forecasts are moving target. And last week everyone was obsessed with what the dots were, as if it was an oracle. And I think we need to recognize forecasts change.”