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Let's dive deeper into the market reaction to this data. We've got Young Yu Ma, the chief investment officer over at BMO Wealth Management joining us now. And Young, it's great to have you on the show this morning. So, I'm curious. I mean, this this consumer sentiment data obviously coming in better than expected. I don't necessarily think it's going to change the game for the Fed next week. So I'm more interested in getting your take on whether or not 25 or 50 is going to be worse for the market action next week. Which do you think traders will be more disappointed by?

Well, thanks for having me on. It's great to be here. It's at least nice to see that consumer sentiment bouncing up a bit. I think that's reflective of what's still a relatively stable job market and you do have inflation coming down in various areas and especially oil prices and gas prices coming down. I think that filters into it a lot. The Fed is going to be looking at a variety of factors. It's probably, we think leaning toward a 25 basis point cut, although we do think in the current environment 50 would be very well justified given how much inflation has come down, notwithstanding the recent CPI and PPI readings. We still think that downward trajectory is intact. Uh and also, we are seeing some softening of the labor market on the margin. The market's reaction if we just get a 25 basis point cut, it's going to then depend on what the messaging and narrative is. If the Fed and Chair Powell sounds especially dovish and just has a 25 basis point cut, I think the market would take that in stride. But if we don't have that type of dovish messaging and only get a 25 basis point cut, I think there could be a perception to the Fed is behind the curve here. And the next Fed meeting isn't until November after this upcoming September one. And that's a long runway until then, a lot of things that could happen in the labor market in terms of potential softening. So, we'd like to see a 50 basis point cut, but probably leaning a little bit more toward 25 being a likelihood.

So then Young Yu, what does that tell us? I guess does that then, or at least from your view, that the Fed is behind the eight ball when it comes to cutting?

We do think the Fed is a little bit behind the curve here. Inflation has been coming down well. The Fed in its discussion of being data dependent has really focused on backward-looking data and and rather than some of the forward-looking indicators of wage gains moderating and some other factors in the labor market that look like they're softening. So we do think a 50 basis point cut is justified. And we think that as we go throughout the rest of the year and into 2025, the Fed is going to continue cutting. So the trajectory is ultimately what's most important. But if we're thinking about short-term reaction, uh it's going to depend on the magnitude of the cut and how much the Fed's messaging leans dovish. And we're also going to get new economic projections out. So that's going to be very important as well that the market focuses on what the Fed is thinking for that trajectory going forward.

Yeah Young Yu, a quick follow there. You talk a lot about the messaging that the Fed needs to have or should have or or maybe is necessary here or what the markets want to wants to hear. They do cut by 25. But what if they go 50? Because then the messaging you could argue would be even more important because that might incite some panic within the market.

We don't think it will. We think that would that's a misplaced idea. Maybe very short-term that could happen, but we do think the underlying economic factors are stable. And really right now, the problem is high interest rates. So if we think about other times in the rate cutting cycles, if we go back to 2001, 2007, 2008, the Fed was cutting rates to try to counteract other problems in the economy. Right now, the primary problem in the economy is actually higher interest rates. So by cutting rates, we think that's a direct effect to solve that problem. Uh and we think ultimately it's going to be taken well by the markets. Even if there's a slight knee-jerk reaction the other way, we think there's no reason for panic.

So Young Yu, super quick and then I'm going to move on to tech with you before we wrap. 25 or 50, which is worse for markets next week?

I'd say 25 is worse. We'd like to see 50 because we think it's warranted. Um and if we only get 25 there is a possibility of that narrative of the Fed being behind the curve just setting in a bit too much.

Right. All right, 30 seconds here. The tech sector. How bullish will rate cuts be for tech as we move into the second half of this year?

Well, we like tech, and we think there's been a nice pullback, some nice entry points were to be had there. And we think as we go into 2025 that the tech sector, both because of interest rates, but also because of continued spending, AI productivity gains, uh we think there's still a very long runway for the tech sector here.

All right. Young Yu Ma, always great to talk to you. Thanks for joining us here. Chief Investment Officer of BMO Wealth Management US. Thanks so much, Young Yu.

Thanks.