Foord Asset Management Portfolio Manager Warns Of Overheated Market Amid Lingering Inflation — 'We Aren't At The End Of Rate Hikes Yet'

Foord Asset Management portfolio manager Brian Arcese reportedly said the Federal Reserve's rate tightening cycle is not over yet as price rises may remain persistent.

"In our base case, we aren't at the end of rate hikes yet," he told CNBC. "I think inflation is still going to be persistent. So, in our minds at least the markets are still toppy here, probably getting a bit ahead of themselves," he added.

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Arcese also highlighted the divergence between tech stocks and the rest of the pack in the S&P 500.

"If you look at valuations, tech is sort of 30-times earnings and up about 30% year-to-date; the rest of the market is up sort of 10-12%. And 10-multiple points lower. So, that's why I think you are likely to see meaningful rotation. You will see markets calm down as well in our view but also a lot of rotation under the hood," he said.

Indeed, much of the rally in the S&P 500 this year has been driven by tech stocks on the back of AI-led optimism. Stocks like NVIDIA Corporation NVDA, Advanced Micro Devices, Inc. AMD, Taiwan Semiconductor Mfg. Co. Ltd. TSM and Microsoft Corp MSFT have registered significant gains since the start of 2023.

The SPDR S&P 500 ETF Trust SPY has gained 12.89% since the beginning of 2023 while the Invesco QQQ Trust Series 1 QQQ rose 34.04%, according to Benzinga Pro.

Global Corporates: Arcese says going forward he is more in favor of U.S. companies that are global corporates compared to firms that would be focussed solely on the U.S. domestic consumer.

"U.S. consumer has been incredibly strong. They have had a massive amount of excess savings, obviously in large part due to Covid stimulus which has lasted a lot longer I think than investors fully understood originally. But we are getting to the end of that. So, it is much harder for the U.S. consumer to continue to propel the U.S. economy," he said.

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