Anika Begay
Despite the recent turmoil in stock markets, Alpine Macro remains optimistic, urging investors to remain bullish as the Federal Reserve has ample tools to stabilize the economy.
“The sharp correction in the stock market does not change our underlying outlook,” the firm said, noting that the Fed’s ability to ease monetary policy could foster a “buy on the dip” mentality among investors.
“We remain optimistic despite the emerging weakness, as the Fed has plenty of bullets,” the firm wrote.
Alpine Macro recognizes that recent market corrections have been triggered by a combination of factors, including the unwinding of the yen carry trade, weak but positive July nonfarm payrolls data, and disappointing earnings forecasts from Amazon (NASDAQ:).
These developments have raised concerns about the sustainability of the AI-driven rally. However, Alpine Macro sees this correction as a “healthy, long-overdue reset” rather than the start of a bear market.
Analysts believe the Fed will cut interest rates without plunging the economy into recession, bolstering the stock market’s recovery potential.
They note that aggressive easing by the Fed could lead to “irrational exuberance in Big Tech,” as investors fear missing out on further gains.
While acknowledging that economic slowdowns are difficult to gauge in real time and that the Fed has a history of policy mistakes, Alpine Macro remains confident of a “perfect macro landing.” It recommends a barbell equity approach that includes defensive sectors, effectively balancing risk and reward.
They also say that “bonds are an excellent hedge against deflation,” noting that they had previously “reduced duration to neutral for purely tactical reasons after yields collapsed.”
Overall, Alpine Macro’s outlook remains bullish, advising investors to seize opportunities as the Fed prepares to ease monetary policy, with the potential for equities to rally in the months ahead.
