Craig Shapiro, Senior Macro Strategist and Cross-Asset Trader at Ninja Trader Live: Federal Reserve Chair Walsh didn’t reveal much information this week, but he seems quite optimistic about economic growth, primarily driven by positive factors in the AI sector. Considering the decline in oil prices and the resulting drop in inflation breakeven points, while I believe the threshold for rate hikes might be higher than the market anticipates, the threshold for rate cuts is actually much higher than the market expects. Given Walsh’s positive assessment of economic growth, a significant deterioration in the labor market may be required for the Fed to truly consider rate cuts. This becomes even more critical as he also hinted that balance sheet reduction might take longer. Of course, a single labor market data point is not enough to establish a trend, but if more evidence starts to emerge indicating a slowdown in the labor market, and at the same time, the Fed extends the timeline for policy easing (especially in the context of persistently high inflation), then I suspect this will create an unfavorable environment for risk assets. In such a scenario, rotating from AI concept stocks to higher-risk cyclical stocks or small-cap stocks will become increasingly difficult, and investors may have to lean toward defensive sectors, or perhaps even gold.