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Stocks rising ahead of tomorrow's Fed policy decision and following better than expected retail sales data out this morning. The Dow extending gains after yesterday's record close. Wall Street though still divided on how big of a cut we will see from the Fed. But what could matter more than the size of the cut is what we're hearing from J. Powell tomorrow. What he signals about the path forward. Here to discuss what this means for the economy, for the markets, we want to bring in Crit Thomas. He's Touchstone Investments Global Market Strategist. We're also joined by Paul Gruenwald. He's a global chief economist at S&P Global Ratings. Great to have both of you here. Paul, let me start with you just in terms of what you are expecting, what you think is warranted at this point given the recent data that we have gotten. I think retail sales really changed much of anyone's thesis here this morning, but what are you expecting or what do you think should be done? Maybe is the better question at tomorrow's meeting.

Right. Well, it's good to be back. The uh we're expecting 25 basis point cut uh tomorrow, but uh the data has been supportive of uh kind of a soft landing, right? Labor market is still good. We got some good numbers uh this morning. It's not just the amount tomorrow, which is largely priced in anyway. It's the path, you know, how how fast is the Fed going to go and how long, but uh everything seems to be lining up lining up for the first soft landing in about three decades. We haven't had one since the 1990s.

And what you point out with that comment too is this idea that we are cutting heading into not recessionary territory, which is a little bit unique, right? And I'm curious from your perspective, Crit, how does that impact your positioning heading into tomorrow because it is kind of a very unique cycle.

It is very unique, but you know, we did have a decent retail sales number. Uh the Fed starting to to cut rates. I mean, what's not to like from a from a market standpoint? Um so

Well, do you not like 25 versus 50? Would you like 50 more?

Well, certainly 25 would be a little bit of a disappointment for the markets, but I I I think that's just would be like a small bump. Um and and then we'll just continue on from there.

Paul, when you talk about the fact that you're confident in a soft landing at this point, if the Fed only goes 25 basis points tomorrow, of course, then there are some critics out there saying that that could actually do more damage to the economy in the long run, that then they're going to be behind the eight ball. Doesn't seem like from your commentary that you're at all concerned about that.

Well, we're not on like the cusp of a recession, right? So labor market is still strong. I checked the GDP now cast from the Atlanta Fed. It's actually ticking up a bit. So it looks like the third quarter is going to print two uh two and a half, and we got some better numbers this morning on both the uh consumer side, on the industrial production side. So again, you know, this the Fed's going to gradually cut rates, but uh we think growth is going to be two-ish. And if if the Fed can pull this off, getting inflation from eight or nine down to two without a recession, minimal reduction and growth, that's uh that's pretty special. But that seems to be where we are right now, as long as the labor market hangs in there.

Dare I say Goldilocks?

I didn't say Goldilocks, but yeah. Soft landing is the term we use, but I guess that one would be appropriate as well.