Michael Contopoulos, Janus Henderson Investors’ head of multi-asset macro investing, believes the market is approaching its peak, though the exact timing of the cycle’s shift remains uncertain.
During an appearance on CNBC’s Fast Money, he addressed the recent rise in interest rates and the overall condition of the US economy.
Janus Henderson Sees a Late Cycle but a Healthy Economy
According to official records, the Federal Reserve voted unanimously 12-0 on September 16 to implement a 25-basis-point rate hike, pushing the federal funds rate to a range of 3.75% to 4%.
At the same time, CNN reported that yields have advanced due to inflation concerns driven by rising energy costs. As of September 24, market traders had priced in roughly a 71% probability of an October rate increase.
Contopoulos does not view this development as an isolated warning sign, highlighting strong corporate earnings and a broadening market instead.
He further pointed to jobless figures, noting that Bloomberg reported initial claims dropped to 197,000 for the week ending September 19, marking one of the lowest levels recorded since 1969.
Even so, he remained direct regarding when a shift might occur.
“I think we are closer to the top of the market and closer to the end of this cycle.”
Michael Contopoulos, CNBC
He noted that the turning point could arrive anywhere from three, six, to 12 months down the road.
Signals in Focus; Another Strategist Stays Bullish
To gauge future direction, Contopoulos is keeping an eye on margin compression, decelerating earnings growth, widening corporate credit spreads—which represent the additional yield corporate bonds offer over Treasuries—and an inverted yield curve.
An inversion happens when short-term yields surpass long-term yields. On the prior Thursday, the 10-year Treasury yield touched 5.22%, while the two-year yield stood at 4.94%.
Additionally, he pointed out that the majority of artificial intelligence (AI) debt issued over the previous six to 12 months is currently trading below its initial issue price.
Contopoulos explained that coordinated global interest rate increases continue to keep US yields high, as investors offload Treasuries to secure more attractive yields internationally. As an example, Japan’s 30-year bond yield reached an all-time high of 4.2% the prior week.
Conversely, not all market strategists share the view that a peak is imminent. David Spika of Turtle Creek maintains that equities could climb another 5% to 10% before the end of the year if crude oil prices sustain their downward trend.
Upcoming economic data releases this week, covering inflation, gross domestic product growth, and employment payrolls, will put both perspectives to the test.