"Investors may wonder how long the Fed can wait before cutting rates"
“The weaker-than-expected data may have investors wondering how long the Fed can really wait before cutting rates,” said Bret Kenwell, a US investment analyst.
After several months of strong retail sales figures, January results fell well short of economists' expectations. Investors expected moderate growth in core retail sales, but instead there was a month-on-month decline. This complicates matters for investors seeking clarity around the Fed's first rate cut.
Due to a series of strong economic reports, it appears that the Federal Reserve felt confident enough to keep rates elevated in hopes of continuing to reduce inflation. That argument was reinforced by this week's inflation report, but weaker-than-expected January retail sales data may have investors wondering how long the Fed can really wait before cutting rates.
It's hard to get too much out of a single report, but this is contradictory data. If the economy is weakening, it could force the Federal Reserve to cut rates.
The stock has had a tremendous run, rising 14 of the last 15 weeks. At some point, a pullback or consolidation would make sense. While delaying a rate cut may be a short-term disappointment for bulls, it would be better to see continued economic strength beneath the surface. That said, we are still in a bull market and economic data remains encouraging. Until that changes, investors should look for opportunities on dips.
