Michael Contopoulos, head of multi-asset macro investing at Janus Henderson Investors, said the market is nearing its top. He cannot say when the cycle will turn.
He discussed the recent jump in interest rates and the health of the US economy on CNBC’s Fast Money.
Janus Henderson Sees a Late Cycle but a Healthy Economy
The Federal Reserve voted 12-0 on Sept. 16 to raise rates by 25 basis points, its statement shows. That lifted the range to 3.75% to 4%.
Meanwhile, yields have climbed on inflation worries tied to higher energy prices, according to CNN. Traders priced about a 71% chance of an October hike as of Sept. 24.
Contopoulos does not see that as a red flag on its own. He pointed to healthy corporate earnings and a broadening market.
He also cited jobless claims. They fell to 197,000 in the week ended Sept. 19, one of the lowest readings since 1969, according to Bloomberg.
However, he was blunt about timing.
“I think we are closer to the top of the market and closer to the end of this cycle.”
Michael Contopoulos, CNBC
He said the turn could be three, six or 12 months away.
Signals in Focus; Another Strategist Stays Bullish
Contopoulos is watching for margin compression, slower earnings growth, wider corporate credit spreads and an inverted yield curve. Credit spreads measure the extra yield companies pay over Treasuries.
An inverted curve occurs when short-term yields exceed long-term ones. Last Thursday, the 10-year Treasury yield reached 5.22% while the two-year hit 4.94%.
He also said most artificial intelligence (AI) debt sold in the past six to 12 months trades below issue price.
Contopoulos argued that synchronized global rate rises keep US yields elevated. Investors can sell Treasuries for better yields abroad. Japan’s 30-year bond yield hit a record 4.2% last week.
Not every strategist agrees the top is near. Turtle Creek strategist David Spika argues stocks could still rally 5% to 10% by year-end if oil prices keep falling.
Key data this week, including inflation, economic growth, and payroll figures, will test both views.
