Wednesday is a key day for Wall Street. May's Consumer Price Index (CPI) will be released, and the Federal Reserve will announce its latest interest rate decision. John Hancock Investment Management co-chief investment strategist Matt Miskin joins Morning Brief to discuss the state of inflation and the Fed's next moves.

Miskin explains that CPI days usually bring market volatility, which he expects on Wednesday. He notes that inflation data shows strength in the housing market, as it makes up nearly two-thirds of the CPI data. He adds that in the current economic backdrop, there may be one or even no rate cuts this year, which markets will not be happy about.

"If the Fed isn't going to be as supportive, we think that could create volatility over the week. We're looking for a stronger dollar, a flattening of the yield curve, and maybe actually a risk-off bid in markets over the course of the week," Miskin tells Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Melanie Riehl

Video Transcript

Piece of news.

That's certainly top top of mind here for investors.

And that's going to be the CP I print that's out on Wednesday.

We've also got the fed decision following just a few short hours later.

I'm curious just to get your perspective on the significance of both of those things happening within the same day.

Maybe what that's going to tell us about.

Should we be expecting some increased volatility as a result?

Absolutely.

I mean you to, to script, you couldn't script this any better in terms of two major market moving events on the same day.

CP I days are always ones where volatility presents itself and then that fed meeting right after that is pretty wild.

So, I mean, for us, inflation data continues to show relatively strength in the housing market shelter or housing puts up about two thirds of the CP I numbers and it's not slowing, we're not seeing it slow that much uh in terms of housing data.

So that's gonna stay relatively firm in our view.

And then the fed might, you know, Paul has been Dovish in nearly every opportunity he's had, he's kept in essence, this inflation impulse alive in our view.

But in terms of the summary of economic projections, where they write down how many fed rate cuts they think in 2024 that might not be uh it might be one this time or, or, or none.

And the market might not like that.

The, the cuts or forecasting of cuts is forward guidance has been great news for the market.

Markets loved it.

But if the fed isn't going to be as supportive, we think that could create volatility over the week, we're looking for a stronger dollar, a flattening of the yield curve and maybe actually a risk off bid uh in markets over the course of the week.

So Matt, what's the average investor to do here?

Should they assume no rate cuts?

Uh 10% market correction sell nvidia.

Yeah, there's, there's three what three suggestions right there.

You know, right now we're just looking at high quality income above 5 to 6%.

It's a really good opportunity and portfolios.

Our view is income is gonna be a bigger driver of recurrence.

We're locking in 5 to 6% in high quality income uh for the next 5 to 7 years.

And we think if you get that done and then think about other things after that, uh that'll situate you well, equity wise, we are in the quality part of the market and, and that A I name is a part of it.

Um So the quality factor across global equities.

What we're looking for high roe stocks, holding stocks, we're not overweight and we're underweight, smaller cap, less risky.

We're underweight international, we're overweight.

Us, large cap, midcap and quality.

Be patient.

Get income, be paid to wait and then wait for better opportunities.

As we think at the end of the year into next year, we're gonna be presenting uh a better valuation entry point for markets.

Matt Miskin, John Hancock Investment Management, Co Chief Investment strategist.

Always good to see you talk to you soon.