The August consumer sentiment reading came in at 67.8, above economists' expectations of 66.9. Citi US equity strategist Drew Pettit and Tematica Research Chief Investment Officer Chris Versace join Catalysts to discuss their market outlooks as stocks (^DJI, ^IXIC, ^GSPC) begin to rebound and recent economic data alleviates recession fears.

Pettit notes that markets are "starting to price out the recession tail risks," suggesting comfort with some economic slowdown but not anticipating "a prolonged recession." He notes that with Federal Reserve rate cuts on the horizon, "markets [are] looking through some of the softness," indicating "a much more balanced setup from here."

Versace points to recent economic data as evidence of a soft landing. He predicts not just one Federal Reserve rate cut, but the beginning of "what is likely to be a rate-cutting cycle," with markets already considering the long-term implications.

For investment strategy, Pettit recommends buying growth stocks defensively, balanced with rate-sensitive cyclicals such as financials (XLF) and consumer (XLP, XLY) stocks.

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

This post was written by Angel Smith