U.S. stocks are not priced for the key rate at 4.5%: Gina Sanchez

S&P 500 is already down more than 10% versus its recent high but Gina Sanchez (Chantico Global) says the benchmark index “might” not be done with the descent just yet.

What’s priced in already?

Sanchez warns the equity market is not ready for the key rate at 4.5% that many expect the FOMC will lift to in its fight against inflation. This morning on CNBC’s “Worldwide Exchange”, she said:

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Equity markets are not priced for that. They’re barely priced for 3.0%. If we actually remain in the three to four percent range well into 2023 and into 2024, the equity markets are not priced for that either.

The U.S. Federal Reserve is scheduled for its next policy meeting on September 21^st.

Some forecast the central bank might go a full percentage point this time after a 0.1% “increase” in consumer prices last month (link).

How to play the current market?

Sanchez, however, is not in that camp. She doesn’t see a reason why the Fed should be more aggressive than it was in its last policy meeting.

I’m concerned the Fed isn’t listening as closely to inflation as it used to. We’ve started to see inflation begin to roll over. We’ve seen wages go flat as well. Those are two important things that the Fed should be paying attention to.

The long-end of the curve, she added, is also suggesting an economic slowdown.

The U.S. economy has already had two consecutive quarters of negative GDP. Still, she recommends selectively picking the growth stocks to play this market instead of sticking to “value.”