Whatever the Fed is doing has not been working, says Verdence’s Megan Horneman

Megan Horneman, CIO at Verdence Capital Advisors, argues markets are too complacent about the Fed and that another rate hike remains on the table because inflation is still far above target. She warns that earnings expectations are vulnerable, especially in high-PE technology, and that long-term bonds carry duration risk as Treasury yields hit multi-decade auction highs. Her key investment takeaways are to avoid heavy exposure to high-PE tech and long-duration fixed income. - The Fed is the top risk; the market is too optimistic and another hike is still on the table. - Inflation remains far above target, with high liquidity and record stocks adding to inflationary pressure. - Earnings growth expectations for the rest of this year and next year are at risk. - Higher interest rates make technology and high-P/E stocks vulnerable. - Long-term bonds are a big risk; the 10-year auction yield hit the highest since 2007 and the 30-year could hit the highest since 2001. - This earnings season's upside was concentrated in two companies, creating volatility risk if they miss. - Technology capex spending will not last forever and could eventually peak.