Risks to the country's growth story are mounting, says Bartlett's Holly Mazzocca
Speakers
Summary
- The labor market has weakened "pretty significantly" since the beginning of March, raising risks to the U.S. growth story.
- The market has absorbed the pricing out of 2-3 rate cuts without major disruption to the S&P 500.
- Weakness in economic activity could be positive for equities if it prompts the Federal Reserve to lower rates and steepen the yield curve.
- Corporations are seen as having a runway to perform well, with AI expected to support margins and capital expenditure.
- The consumer's reaction to labor market weakness and geopolitical headlines is a key uncertainty.
Summary
- Brian Levitt suggests that if last week was the peak in the geopolitical risk index, history indicates the next 12 months should be good for stocks.
- Both speakers acknowledge a weakening labor market, which introduces new risks to the economic growth story that was previously strong.
- Levitt posits that economic weakness could prompt Fed rate cuts, which would steepen the yield curve—a scenario he views as positive for equities.
- Holly Mazzocca notes that corporate earnings expectations have held up due to anticipated AI-driven productivity and capex, despite consumer concerns about job stability.
Trade Ideas
"My perspective on that is that weakness in economic activity is actually going to be good for equities, because the Federal Reserve is going to lower interest rates and steepen the US Treasury yield curve." The speaker explicitly links economic weakness to an expectation of Federal Reserve rate cuts. Lower policy rates typically lead to falling yields on the long end of the curve, which increases the price of long-duration Treasury bonds. The anticipation of Fed easing is a direct catalyst for going LONG on long-term Treasury bonds (TLT). Geopolitical events (like the conflict mentioned) could reignite inflation fears, keeping the Fed on hold or even prompting hikes. A stronger-than-expected economy would also delay or negate the need for cuts.
Same as above: "...the Federal Reserve is going to lower interest rates and steepen the US Treasury yield curve." A steeper yield curve (where long-term rates are significantly higher than short-term rates) is traditionally beneficial for the net interest margin of banks. They borrow short-term (deposits) and lend long-term (loans). This environment would improve profitability for the financial sector. The expectation of a steeper yield curve is a classic reason to be LONG the financial sector, represented by the XLF ETF. If the economic weakness cited is severe, it could lead to higher loan defaults, offsetting the benefits of a steeper curve. Geopolitical stress could tighten financial conditions independently of the Fed.
"A lot of that comes down to this expectation that you can see productivity from AI support margins, and you can see opportunities for continued investment in capital expenditures." The speaker states that earnings expectations are being supported by the belief that AI will boost productivity and margins. This is a direct endorsement of the technology sector, which is the primary driver and beneficiary of AI investment and implementation. The maintained earnings outlook based on AI productivity is a fundamental reason to be LONG the tech sector, represented by broad ETFs like XLK or QQQ. High expectations for AI are already priced into many tech stocks. If the promised productivity gains fail to materialize in earnings reports, the sector could face a sharp correction. A weaker consumer could also hurt demand for tech products and services.
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This CNBC video, published March 16, 2026, features Brian Levitt, Holly Mazzocca discussing TLT, XLF, XLK, QQQ. 3 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Brian Levitt, Holly Mazzocca · Tickers: TLT, XLF, XLK, QQQ