As the stock market continues to rise, investors are paying close attention to the Federal Reserve’s (Fed) upcoming meeting.

Jordan Jackson, Global Market Strategist at JPMorgan Asset Management, sheds light on key factors impacting the Fed’s decision and the implications for investors.

Jackson highlights that inflation, particularly core services excluding shelter, remains elevated at 8.2%.

With strong job growth of 275,000 on a 3-month average, the labor market suggests that the Fed cannot cut interest rates.

Additionally, the Fed is historically reluctant to cut rates within two months of an election, making it unlikely this year.

Despite the potential downside to the stock market in a higher interest rate environment, Jackson believes equity markets can still perform well as long as rate cuts are expected.

However, earnings become crucial, and large cap companies with strong cash flow positions may benefit.

Regarding inflation, Jackson is skeptical that it will magically subside, suggesting that businesses may continue to exercise pricing power due to robust consumer spending.

Hence, he prefers defensive investments such as energy, technology (including large tech companies), healthcare, and consumer-driven names.

Furthermore, as the rapid advancement of artificial intelligence (AI) intensifies, the increase in electricity demand could present investment opportunities in electricity providers, power grid companies, and infrastructure players.

By considering the implications of the Fed’s decision and identifying potential areas of growth, investors can navigate the market uncertainty and position themselves for financial success.

Inflation persists and the Fed likely won’t cut rates before the election.

Core services excluding shelter inflation remain high at 8.2% and the labor market remains strong, making it unlikely that the Fed will cut rates in the near term.

Equity markets can perform well in higher interest rate environments, but stock selection becomes critical.

Large-cap companies with strong cash flow positions may benefit from rate cuts, but earnings and stock selection become important in selecting companies that can weather higher rates.

Artificial intelligence’s growth may drive investment opportunities in electricity, power grid, and infrastructure companies.

The increasing electricity demand due to AI could present investment opportunities in these sectors for long-term growth.