As the Federal Reserve initiates its first interest rate cutting cycle in four years, Citi head of US equity strategy, Scott Chronert, joins the Catalysts team to discuss how to navigate markets (DJI, GSPC, IXIC) in this transition period.

“From a stock market perspective, I think we're in a transition phase,” Chronert says. "We're at the end of a two-year hawkish Fed narrative, and we're going down the path of something different. But this first 50-basis-point cut... we're still in a fairly restrictive monetary mode.”

“The transition phase that we're in here is that we have to allow that, historically, when the Fed begins to ease, it's typically in response to some underlying economic concern.” Chronert tells Yahoo Finance, stating Citi has been “referring to it as fraying around the edges.”

“We don't think it dramatically impacts the S&P 500 aggregate index earnings performance, but we have to allow that as we go into the Q3 reporting period and then into the end of the year, there's probably a bit more downside risk to those more traditionally economic sensitive sides of parts of the market as to their fundamental trajectories.”

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This post was written by Naomi Buchanan.