Markets are overrun with bearish sentiment that ignores the resilient economy, strategist says; 'Earnings can hang in there'

US stocks end higher, Dow soars again

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  • The US economy remains resilient despite strong bearish sentiment on Wall Street, said Hightower Advisors’ Stephanie Link.

  • She told CNBC on Friday that “underneath the surface, things are not as bad” as they seem.

  • Link added that earnings have been strong, excluding a lagging tech sector.

The outlook on the economy isn’t all bad when you take a closer look, according to Hightower Advisors chief investment strategist Stephanie Link.

She told CNBC on Friday that despite overwhelming bearish sentiment on Wall Street, the US economy has thus far been resilient, even though the Federal Reserve may trigger a slowdown with interest rate increases.

“I’m not saying we’re off to the races. I’m just saying the economy is actually in better shape. There’s more underlying momentum than it’s is given credit for,” Link said.

She cited a 2.7% fourth-quarter growth clip for US gross domestic product as a bullish indicator and the Atlanta Fed’s first-quarter GDP tracker showing a 2.5% expansion rate.

Link also pointed to weekly jobless claims falling below 200,000, the Chicago Fed’s economic activity gauge turning positive again, as well as the ISM’s purchasing managers index indicating expansion..

“As a result, earnings can hang in there,” she said, noting that earnings are up 6.5% when excluding the tech sector but down 2% including it.

Link added, “Underneath the surface, things are not as bad. And I think we can be in this trading range” until there’s more clarity on what the Fed will do on rates.

Early Friday, the Fed’s preffered measure of inflation, the core personal consumption expenditures, climbed 0.6% in January from the prior month, coming in larger than expected and sending stocks lower as investors feared more hawkishness.

Economists at the Cleveland Fed argued in a recent working paper that for the central bank to achieve its 2% inflation goal, it would require drastically higher unemployment and a deep recession.

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