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Stock features are relatively quiet this morning after a whipsaw week left investors on edge. You're looking at a mixed picture right now with the Nasdaq leading the way up just about four-tenths of a percent. Well, now Wall Street is bracing for a fresh read on inflation and also retail sales. That is going to provide some insight as to whether or not maybe a US recession could be in the cards. A fear that had a roiled markets last week. For more, we want to bring in Mary Ann Bartels. She is the chief investment strategist at Sanctuary Wealth, and we also want to have we also have Dennis Debusschere. He is the president of 22V Research. It's great to have both of you. Marianne, let me start with you. Coming off of what was obviously a very volatile week here for the markets this week, what do you think the setup looks like ahead of those econ prints that we're going to be getting later this week?

Because of the violent move that we had from the deleveraging of the Yen carry trade and the major spike that we had in the VIX, which was the third highest, um, going all the way back to 2008 and 2009, we now have very oversold conditions within the marketplace. Um, whether you're looking at the S&P, Nasdaq, Magnificent 7, and in fact, um, we're so oversold that we're starting to get early buy signals. So I think we're actually if we can have, um, data that's comforting to the market, I think we're in for a rally for the next couple weeks, and I do think it's going to be led by tech and tech related.

Well, Marianne, I got to I got to follow on that before we get to you, Dennis. I'll come to you in a second here. But what are you basing the confidence on in the market rally to come in the coming weeks, given that there is potential that the carry trade didn't fully unwind, given that we could see more volatility off of this week's data prints, and that there's still the looming growth scare question in the room?

Well, we did look at the commitment of trader reports for non-commercial, which is really basically your fast money or traders. And that's almost completely closed. There's not a lot of short positions, at least based on that data. Does it mean that there's not other positions around the world, but here in the US, it looks like the trade is pretty much closed. So I think volatility can actually come down. So how do I say a buy signal? So that's where we lean on the technicals, and we've looked at the 14-day stochastic, and that is an oversold condition. And remember we used to talk about Fang? Well, there's an index that's called the New York Stock Exchange Fang Plus Index, which is the magnificent seven plus a few others. And that's actually generated a buy signal from the stochastic. So I think this is an oversold bounce. By no means do I think we're out of the volatility range. I am expecting volatility to pick back up again back in the fall months around at September and October, but right now I think we're rallying, which will give uh investors an opportunity to rebalance their portfolios if they haven't already done so.

So Dennis, how are you looking at the risk of slowing growth right now and how big of a headwind that could be for stocks?

Well, it could be a major headwind uh insofar as the tail risk is is higher, right? So to the extent that you end up in a negative feedback loop for the economy, which would be related to obviously the unemployment rate moving up to 4.3%, to the extent that impacts confidence, uh corporate decisions, etc, you have the tail risk uh and the earnings tail risk related to uh a recession. Uh we we don't think a recession is a base case at all, but that risk is out there. Um, time will reduce that tail risk. And when I say time, time and in line data. So you take this kind of short in the time frame, you take this week's data and you look at it, if it were to come mostly in line with consensus, just going on Mary's comments, volatility would come down. Your odds that the normal economic expansion uh would continue would increase. Um, so you need uh negative data from here to justify higher recession risk odds, which are elevated. I mean, I I don't want to diminish that point. Uh but to the extent that you don't get it, uh you'd probably want to be a better buyer than seller of the market.

Uh Dennis, let's talk about your rate call for the Fed. I know you're thinking a 50 basis point cut come September. Talk to me about that call, and to what extent does the market action and volatility that we have seen play into that call?

Uh great question in the sense that if you're getting our call is 50 basis points, as you say, and if it's 50 basis points in a risk management fame framework, because at the end of the day, you have a 4.3% unemployment rate, you have inflation that is slowing, hopefully that data is confirmed this week again. And in that context, if you're going to cut 50 basis points and very quickly get back to some level of less restriction in a non-recession scenario, it is very positive for risk assets, all all things equal. That's full stop. Now, importantly, if you get 50 basis points with uh an unemployment rate of 4.5%, then it's negative. So, when you think about it in risk asset terms, when you think about it in market terms, it's very related to how are you getting the cuts in relation to where your baseline economic outcomes are uh developing. In our view, it's going to be non-recession, and to the extent that that happens, you want to be a buyer of rate cuts because it's going to be an important positive.

Mary Ann, what do you think? Do you agree? And how are you thinking about rate cuts?

So I the proxy that I'm using is actually the two-year Treasury yield. Um, we've been saying for quite some time that rates have peaked both at the short end and the long end of the yield curve, but it looks like a major top is forming in the two-year Treasury. And if that breaks and stays below three and a half, we can get that rate down to a two to one percent handle. And the only explanation I can come up with is that you would have to be in a recession or very close to a recession to get rates down at that level. So we're watching the two-year to actually signal if the economy is uh significantly slowing.

Dennis, I want to give you the last word here. I what Mary Ann was saying that this week, this past week, rather was just leverage getting pushed out of the system. Will this week's economic data really be that much of a referendum on the market volatility that we saw last week?

It has the potential to be. I don't want to get over my skis on it, but you know, at the end of the day, you're sitting at a 20 VIX, which is high for any uh normal economic expansion. So to the extent that you have data that does not confirm fears of a impending recession, it's probably going to be more positive than negative uh week for markets. So, you know, the way you got to think about this is what are we going to find out that's new to make the downside risk come to fruition, right? So you're going to have to make a bet that claims will be worse. You have to make a bet that retail sales will be worse. You have to make a bet that housing data is going to be worse. Could be the case, but everything we're seeing from a high frequency point of view doesn't suggest meaningful downside risk from here to the economic data.

All right, Dennis and Mary Ann, thank you both so much for kicking off this trading week here and what investors need to expect ahead of what is going to be a very busy week here for econ data. Thanks to you both.