US Equities (^GSPC, ^DJI, ^IXIC) have traded lower on Tuesday as investors grow concerned that the first interest cut of the year will come later than hoped. Charles Schwab Chief Investment Strategist Liz Ann Sonders joins Market Domination to discuss why the Fed may not yet have the green light to start cutting rates.

Sonders explains that Fed policy doesn't easily map onto market outcomes: "It depends on the why, in terms of what the Fed is doing. It's not as simple as just if we only knew the policy path on the part of the Fed that we would know what the market is going to do. Interestingly, had the market been right at the beginning of the year of a March start and seven rate cuts, not only did we feel that was the market was getting over its skis, I think that would have been a really poor backdrop for the market. That would suggest suggest that we were probably moving into a recession type condition or financial crisis type conditions."

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

JULIE HYMAN: Stocks lower as investors concerns grow that the first interest rate cut of the year will come later than hoped. We heard from a few Federal Reserve members today, including Cleveland Fed President Loretta Mester. She said she still expects three interest rate cuts this year.

San Francisco Fed President Mary Daly saying that three cuts is reasonable, but not promised. Our first guest this afternoon thinks the Fed does not yet have a green light to start cutting rates. Let's welcome in Liz Ann Sonders, Charles Schwab Chief Investment Strategist. Liz Ann, always great to see you. Thanks so much for being here.

LIZ ANN SONDERS: My pleasure. Thanks for having me.

JULIE HYMAN: What changed today? Did anything change today? I mean, because here we have kind of what we have been seeing.

In other words, economic data coming in relatively strong. Yields moving higher to some degree. Stocks have been pretty resilient this year. Today, we're seeing them roll over a little bit. What's going on?

LIZ ANN SONDERS: So I think it may be just an elevated focus on the fact that versus the beginning of the year, when the market was way over its skis and expecting the Fed to start cutting in March and up to seven cuts. That came in line with the Fed, or I should say, the dot plot, which is not a policy prescription. And rightly so Powell continues to try to remind investors of that.

But now, the market is actually expecting less than three cuts. So, sort of leapfrogged, the expectations set by the Fed's dot plot. And I think that may be coming into the mix, whisper numbers of Friday being a hotter than expected.