Despite recent turbulence in the equity markets, Alpine Macro remains optimistic, urging investors to stay bullish as the Federal Reserve has ample tools to stabilize the economy.
“The violent equity correction does not change our baseline outlook,” the firm stated, emphasizing that the Fed’s ability to ease monetary policy could support a “buy the dips” mentality among investors.
“We remain bullish despite the emerging soft patch because the Fed has plenty of bullets at its disposal,” wrote the firm.
Alpine Macro acknowledges that recent market corrections were triggered by a combination of factors, including the unwinding of the yen carry trade, weak but positive July nonfarm payrolls, and disappointing profit guidance from Amazon (NASDAQ:).
These developments raised concerns about the sustainability of the AI-driven rally. However, Alpine Macro views this correction as a “healthy, long-overdue reset” rather than the start of a bear market.
The analysts believe that the Fed will cut interest rates without tipping the economy into recession, reinforcing the potential for equities to recover.
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 errors, Alpine Macro remains confident in a “perfect macro landing.” They recommend a barbell equity approach that includes defensive sectors, balancing risk and reward effectively.
In addition, they state that “bonds are an excellent deflation hedge,” noting that they previously “dialed back duration to neutral for purely tactical reasons after yields plunged>
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 climb higher in the months ahead.
