Marathon's Richards Says Equities Can Absorb 25 Bps Fed Hike

Summary

Marathon Asset Management CEO Bruce Richards says equities can absorb a 25-basis-point Federal Reserve rate hike because earnings, revenue, economic growth, and the consumer remain strong. He expects the FOMC majority may vote to raise rates if upcoming CPI and PPI prints stay above 3%. He also notes economic momentum is improving in Europe and globally.

• Richards sees a likely 25 bps Fed hike if Thursday PPI and Friday CPI exceed 3%.
• He says inflation has remained above the 2% target for 66 months.
• He argues most FOMC members want to hike, putting pressure on Chair Powell.
• Equities can absorb a 25 bps hike, supported by 30% year-over-year earnings growth and 9% revenue growth.
• He cites strong GDP growth around 4.7% for the quarter, or about 8% nominal with inflation.
• Consumer strength is supported by 162,000 jobs plus 55,000 positive revisions.
• He notes economic momentum is improving in Europe and globally.