Tuesday’s market sentiment was influenced by Wolfe’s analysis, suggesting that recent inflation and employment trends align with expectations for the Federal Reserve to cut interest rates twice in the current year.

Wolfe’s outlook is based on the Core Personal Consumption Expenditures (PCE) Price Index approaching the Fed’s 2% target and Federal Reserve Chairman Jerome Powell’s comments from the March Federal Open Market Committee (FOMC) meeting. Powell labeled the inflation impact of tariffs as "transitory," indicating a greater focus on employment data in the upcoming months.

Investors are advised to pay close attention to the March employment report, set to be released on Friday, April 4th, at 8:30 am ET. Wolfe raises concerns about the potential for weaker non-farm payroll reports in the next one to three months. A perceived delay in the Fed’s response to economic indicators could impact stock market performance negatively. Conversely, stronger economic news could have a positive effect on stocks.

In response to these economic projections, Wolfe recommends a defensive stance in the near term, favoring sectors such as Consumer Staples, Healthcare, Real Estate Investment Trusts (REITs), and Utilities. These sectors are typically considered more stable during economic uncertainty.

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