US Bank Asset Management Group CIO Eric Freedman joins Market Domination to discuss his outlook on equity markets (^DJI, ^IXIC, ^GSPC) as inflation is anticipated to remain high.

“It’s really that broadening out effect that we think is gonna take hold as we get deeper into this quarter,” Freedman explains. He points to current robust corporate profits and widespread gains from earnings as good indicators for the market.

Despite inflationary pressures anticipated to accelerate, Freedman isn’t particularly worried. He says he expects inflation to increase at levels that will not cause a significant impact on corporate profits. “With a lot of inflation data coming in next week, there’s a potential for some downward pressure in the very near term,” he adds.

“We think that owning commodities makes some sense and still owning stocks alongside commodities is a way for clients to be participating in both phenomena,” Freedman tells Yahoo Finance's Josh Lipton and Julie Hyman.

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

This post was written by Melanie Riehl

Video Transcript

The dow aiming for 1/7 straight day of gains here.

Our first guest is overweight us equities, suggesting better times are ahead for more on where investors should be looking.

And we're bringing in Eric Friedman Cio at us Bank Asset Management Group, Eric, it is good to have you on the show.

So you want to be overweight domestic equities, Eric, maybe we'll start there, walk us through why you're constructive on, on, on the US stock market, Eric and, and where you want to be invested where you're seeing opportunity.

And Josh, I think you did a great job and, and, and Julie in the lead up in terms of why it's really that broadening out effect that we think is gonna take hold as we get deeper into this uh this quarter.

So specifically, you're seeing a decent well represented consensus, we think actual increased earnings estimates which, which has held.

So you're seeing a robust corporate profit picture, you're also seeing some more broad um participation by sectors.

Again, that graphic you had up earlier just showing just how widespread a fuel gains are.

That's exactly how we want to play this market.

We use weakness in April both across domestic equities as well as commodities to add to positions.

We think that both corporate earnings will accelerate.

We also think that inflation will accelerate as we get deeper into this year.

So those are two things we believe in the way that we did.

It was through equal weight S and P. We think that gives you a more balanced approach.

It's uh it's certainly from a valuation perspective better than going into the, the, the obviously that the general S and P uh from a straight market cap waiting perspective.

So equal weight we think is the right way to approach it, that broadening out effect we think is gonna continue.

How will it continue?

If indeed, as you said, inflation still accelerates doesn't just stay where it is, but accelerates from here, you would think that that could spell some bad news for different areas of the market.

Yeah, it's a great point.

Julie, I think if you look at the, you know, the sort of rate of change that we're assuming with inflation, it will be increasing but not increasing at levels that really cause a significant thwart if you will to corporate profit.

So we think there's a difference between what's called tail risk hedging within commodities, which is when you have, you know, oil prices just rally massively where you see really out of control inflationary responses.

That's the market that we think we're gonna get.

We do think that again, with a lot of inflation data coming in next week, there's a potential for some downward pressure in the very near term.

But we do think that's gonna pick up as we get deeper into the year.

So as long as it doesn't get to a, a massive acceleration, if you will, we think that owning commodities makes some sense and still owning stocks alongside commodities is a way for clients to be, to be participating in both, uh, both phenomena.