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First and foremost here, I mean, this is a economic data sensitive market right now as we're trying to figure out whether or not the Fed is actually behind in cutting. How are you continuing to navigate what we've seen in some of the chop, the volatility thus far in August?

Yeah, thanks Brad. Great to be here. It is a very sensitive market and right now, all of a sudden, things have come together and what seems like almost a Goldilocks scenario for the data. Uh it's a tremendous shift from what we had uh a week or so ago when we had the market sell off, but now we have CPI coming in soft, uh which was expected, but then we have weekly initial unemployment claims continuing down and retail sales coming in very strong. We have a very strong confluence of data now along with Fed comments that they are ready to cut rates and stand uh ready to respond to labor market softness. So it's really coming together in a nice way and we think the soft landing is firmly in place and probably actually setting the stage for growth acceleration toward the end of the year into early 2025. So we think the market reaction here uh is right to take this data very favorably.

Yung-Yu, what do you think that growth more specifically looks like?

In 2025, we think a lot of the growth is going to come from corporate spending. We think there's a lot of pent up demand once interest rates do get a bit lower. The market have been expecting the Fed is expecting the Fed to cut rates by about 1% by the end of the year. Perhaps it will only be three quarters of a percent depending on how the data come in specifically, uh some of the jobs reports that come in the next couple months. But regardless, whether or not that's a three quarter percent or percent, probably that's just about enough to move the needle for corporations to start releasing some of the spending plans uh that may have been on hold for some time, some of the pent up demand by consumer loans as well. We think uh there's a broad credit expansion that can take place here in 2025.

If we hear more about spending plans from corporations at a time where that's been one area that investors have dinged big generative AI continued spends, especially for some of the big tech companies that have said, hey, we're just getting started, uh and they're looking for the payoff as well as some of the investors looking for the shareholder returns there. At the end of the day, if we do see more of those spend announcements, what does that signal to you in terms of what we could see on on a hit for earnings growth?

Well, so there are there's mixed data on this, right? And there's concerned there'd been concerned that some of the AI spending is unsustainable and that it's not resulting in ultimate productivity gains or efficiency gains for companies. We think AI is still in the very early stages, the spending is going to be much more broad-based than it currently is, uh in terms of how it permeates the economy and how companies are going to focus on this in the coming years. So we still think we're in the early stages. There's of course going to be somewhat of ebb and flow to the data and the enthusiasm about AI. But we do think that uh there's a lot of runway to come here in spending, whether it's uh not just data centers, not just chips, um but it's really going to spread out across the economy, uh in terms of companies wanting to uh invest more in this and look for ways to gain efficiencies.

Yung-Yu, given your outlook here, you're expecting growth and maybe by towards the end of the year, especially going into 2025, you're taking a look at these data points, much stronger than expected. Does this retail sales print, does this essentially take a 50 basis point cut off the table next month?

I it's a big number. I mean, there's no question about it. This is a very large surprise, the upside for retail sales and very broad-based. There's a lot of strength there that the consumer is showing. I don't think it takes 50 basis point cut off the table. I do think that the August jobs report is still going to be very important for the Fed to uh assess and determine how much it wants to cut cut rates in September. And let's keep in mind that rates are very restrictive. We had the uh president of Chicago Fed coming out and saying just that that if you think about the economy being in balance now, which perhaps it is between uh where inflation is and where the labor market is, rates are still very restrictive. So there is quite a bit of room for the Fed to cut rates. Whether or not it starts off with a 50 basis point cut remains to be seen, but I don't think it takes it off the table. And that's what the market's excited about. We could get strong cuts along with this strong data.

If we don't see strong cuts, how how long does that kind of prolong, if you will, the the broader rate policy cycle of of cutting as they look to commence that uh perceivably at the September meeting, because even if we don't get 50 basis points, it seems like all eyes are on at least 25.

All eyes are on 25, but also November and December, it's expected we're going to keep cutting rates. So I think what the market is seeing here and keying off of is that the Fed is about to embark on a rate cutting campaign that's going to last throughout probably most, if not all, of 2025. So when you think about that trajectory, it is a very uh comfortable and uh and almost uh enthusiastic uh trajectory that the market is is looking at right now that uh sure it'd be nice to start off with 50 basis points. I think the Fed has room to do that given where CPI, uh where CPI and other inflation data is now and along with some weakening in the labor market, which has been taking place. Uh but regardless, if even if we don't start with that, uh it's important to keep in mind that the Fed is really going to be in rate cutting mode for some time to come.

Yung-Yu Ma, BMO Wealth Management US Chief Investment Officer. Thanks so much for joining us here ahead of the opening bell this morning.

Thanks, Brad.