RiverFront Investment Group Senior Market Strategist Rebecca Felton joins Yahoo Finance Live to discuss U.S. GDP data, earnings, consumer spending, and the outlook for markets.

Video Transcript

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JULIE HYMAN: GDP rose more than expected in the fourth quarter. Our next guest, though, says mixed signals from the latest earnings reports and economic data has left her in a neutral holding pattern. RiverFront Investment Group Senior Market Strategist Rebecca Felton joins us now.

Rebecca, we were talking about this earlier that it is confusing right now. You have the macro data, but even amongst the companies that are reporting, some of them cutting jobs and talking about a weak economic environment. And then as Sozz pointed out, companies like ServiceNow seeming to indicate that demand is remaining robust. Like, how do you get sort of objective clarity in this environment?

REBECCA FELTON: Well, good morning, Julie. And thank you all so much for having me. It is a difficult period to navigate through because, to your point, the earnings season hasn't been terrific, but it also hasn't been as bad as was feared. And maybe we're going to see the end here of some of these downside earnings estimate revisions.

But you do see that GDP number this morning. The job market is-- or the jobs numbers are still very strong. And even though the consumer has cooled somewhat, we are still seeing spending growth there. So there are a lot of mixed signals. But what we want to do is get through earnings season and make sure that the guidance isn't much more negative than what we have already seen before we start making decisions about where to put more money to work.

BRAD SMITH: What's the low end of that guidance that you would be willing to accept or perhaps in the range of what you're anticipating?

REBECCA FELTON: Well, I think as much as anything, it won't be just about earnings. It's going to be about profit margins. We've already seen profit margins come down against a tough comp in Q4 of 2021. Per the last FactSet report we saw, profit margins were around 11.4%, again, down about a point from last year but still hanging in there with that five-year average. So that's going to be a really important component as much as the absolute earnings numbers.

BRIAN SOZZI: Rebecca, how concerned are you about the personal savings rate in this country? 2.9% seems very, very low. Do you think that will start to impact consumer spending at some point?

REBECCA FELTON: It would almost have to. And of course, that is of concern. The other thing that is of concern is the fact that credit card debt, while still manageable, is starting to tick up at the same time these interest rates are going higher. So we know savings rates are lower.