Tech lags and Fed commentary a sign of extreme valuations, says Empower's Marta Norton

Core Insights - The discussion highlights the current volatility in the tech sector and the implications of the Federal Reserve's stance on interest rates, indicating that the market may be overly optimistic about potential rate cuts [3][4][6]. Market Valuations - Extreme valuations in the market are noted, with historical data suggesting that such extremes can predict three-year returns, emphasizing the importance of earnings as a driving factor for market performance [2][7]. - The market is currently pricing in a scenario where rates could fall below 3% by next year, contrasting with the Fed's more cautious outlook [4][6]. Economic Indicators - Recent retail sales data has shown strength, which complicates the Fed's decision-making process regarding interest rates, as they are wary of past inflation experiences [6][7]. - The overall economic backdrop is crucial, with the expectation that avoiding a recession will support market growth [7]. Market Performance - The market is on track for a strong September, potentially the best since 2013, with significant gains in technology and communication services [9][10]. - There is an expectation of consolidation following the recent market run-up, with a focus on the fourth quarter potentially leading to further gains [8][10]. Sector Strength - While technology remains a focal point, there has been notable strength in other sectors such as financials and industrials, indicating a broader market resilience [12][13]. - The current market dynamics suggest fewer valuation opportunities, as strength is not limited to growth stocks alone [13].