Jay Woods on Market Lows, Fed Decisions, and Software Stocks

Market Outlook and Recession Fears

• 📉 The speaker expresses skepticism about recession predictions, noting that the NBER often labels recessions only after they are halfway through.
• 💡 Despite two negative GDP quarters in 2022, the speaker avoids definitive recession calls, preferring to let economists and professionals make the final determination.
• 🤷‍♂️ When asked about market direction, the best current advice is to "mumble" due to significant uncertainty and an inflection point.

Federal Reserve and Economic Uncertainty

• ⚠️ The speaker anticipates downside potential from the upcoming Fed decision, especially if Jerome Powell focuses on ongoing uncertainty rather than a clear path to rate cuts.
• 🗓️ A potential cut in June, as suggested by earlier 100 basis point hike discussions, might be overshadowed if Powell addresses tariff uncertainties.
• 🏛️ Powell is unlikely to cut rates immediately to avoid appearing influenced by the president, but he could signal future cuts, which might still create market unease.
• 🗣️ The narrative from Powell and any subsequent statements from Washington will be crucial in shaping market sentiment.

Technical Analysis and Sector Rotation

• 📈 Small-cap stocks have shown a trend change by moving above their 50-day moving average, indicating a potential relief rally after being heavily beaten down.
• 💡 This technical signal suggests a trading opportunity for those looking to rotate into previously underperforming sectors.
• 🎢 Tech and discretionary sectors, also among the worst performers, have experienced a significant relief rally, now reaching attractive levels for potential investment.

Software Sector Pick: Service Now

• 💡 The speaker's pick is in the software sector, specifically Service Now.
• 📉 Service Now experienced a significant drop (43%) after its January guidance but has since rallied back strongly.
• 🚀 Despite potentially missing a large part of the current move, the long-term story for Service Now remains intact, with the AI story being a key factor to watch.
• 📊 The IGV (iShares Expanded Tech Sector ETF) and Service Now are highlighted as areas to watch within the tech sector due to their favorable risk-reward profile.