US stocks (^DJI, ^IXIC, ^GSPC) closed the session higher on Tuesday, ahead of September's Consumer Price Index (CPI) report due out on Thursday. Richard Bernstein Advisors CEO Rich Bernstein joins to discuss the current market dynamics and what they signal for the Federal Reserve's interest rate strategy.

Bernstein notes that investors are not fully grasping the unusual dynamic of the Fed cutting rates as corporate profits accelerate. He explains, "profits drive employment," which would typically lead the Fed to hike rates, but the opposite is occurring. He believes this is "adding fuel to the fire," creating a favorable environment for cyclical stocks.

However, with the Fed basing their rate-cutting decisions on lagging economic indicators, Bernstein cautions, "I think there's a real chance that in three to six months, people will be saying the Fed cut too quickly and the economy is too strong, so maybe they have to reverse course."

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This post was written by Angel Smith