ADP Jobs Data, March Service PMs, Powell, and the Fed Heads
Assessing the impact of Taiwan's 7.4 magnitude earthquake
Following a day off, the pace of March economic data picks back up today with ADP’s March Employment Change Report and back-to-back looks at the March Services PMIs. For ADP’s report out at 8:15 AM ET, the market expects that report to 148,000 jobs were added during the month, up from 140,000 in February and 111,000 in January. We will also be examining the wage data contained in that report - while the year-over-year gains have been trending down of late, in February the median change in annual pay for Job-Stayers rose 5.1% YoY while for Job-Changers it was up 7.6%.
At 9:45 AM ET and 10:00 AM ET, the market expects Services PMI reports from S&P Global and ISM, respectively, to show that part of the economy continued to grow handsomely during March. Coming off the corresponding Manufacturing PMI reports for March that rekindled questions over the start of as well as the number of potential rate cuts this year, what this morning's data says about inflation will be key to how equities trade this morning. Comments following that data deluge from four Fed officials, including Fed Chair Powell (12:10 PM ET) are likely to shape this afternoon’s trading session.
Heading into this swirl of data this morning, US equity futures point to a lower open, and the yield on the 10-year Treasury is up slightly to 4.367%.
Taiwan Semiconductor (TSM) halted some chipmaking and evacuated plants after the biggest earthquake to hit its home island in 25 years, raising concerns about disruptions to the global tech supply chain. Key customers include Apple(AAPL) and Nvidia (NVDA).
Intel's (INTC) stock fell over 4% after the company revealed an operating loss of $7 billion on revenues of $18.9 billion for its Foundry business in 2023 compared to the $5.2 billion loss of $27.5 billion in sales in 2022. Intel shared that Foundry's operating losses are expected to peak this year and break even between the current quarter and 2030. The company targets becoming the second largest semiconductor foundry behind Taiwan Semiconductor (TSM).
Today, Disney (DIS) shareholders will settle a proxy battle led by billionaire investor Nelson Peltz. Voters will decide whether the company’s board deserves another year together, or if candidates nominated by activist investors, including Trian Partners’ Peltz, should replace certain directors.
Model Musings
Digital Infrastructure, Nuclear Energy & Uranium
“A surge in demand for electricity to feed data centres and to power an artificial intelligence revolution will usher in a golden era for natural gas, producers say. AI’s soaring energy needs will rise well beyond what renewable energy and batteries can deliver, executives argue, making more planet-warming fossil fuel supplies crucial even as governments vow to slash their use." Read more here
Market Hedge Model
“The Dow Jones Industrial Average fell for a second day, continuing Wall Street’s lackluster start to the quarter, as bond yields rose and traders lowered expectations that the Federal Reserve would cut interest rates in June… What we’re seeing is a one-two punch with the combination of continued hot inflation data with profit taking,” said Greg Bassuk, CEO of AXS Investments. With “very significant Q1 market gains … we’re due for a little correction. But we think that the investor narrative also continues to be higher for longer with respect to interest rates.” Read more here
Safety & Security
“As tensions between major powers continue to grow, many nations are increasing their investments in defense capabilities. With weapons stock depletion heightening the need for new and advanced technologies, the defence industry is poised to see significant growth in the coming years.” Read more here
The Strategies Behind Our Thematic Models
Aging of the Population - Capturing the demographic wave of the aging population and the changing demands it brings with it.
Artificial Intelligence – Software, chips, and related companies that facilitate the collection and analysis of large data sets and autonomous generation of solutions given non-machine language prompts.
CHIPs Act – Capturing the reshoring of the US semiconductor industry and the $52.7 billion poised to be spent on semiconductor manufacturing.
Cloud Computing – Companies that provide hardware and services that enhance the cloud computing experience for users, such as co-location, security, and edge computing.
Consumer Inflation Fighters - Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
Core Holdings – Companies that reflect economic activity and are large enough to not get pushed around by day-to-day market trends. Low-beta, large-cap names able to better withstand economic turmoil.
Cybersecurity - Companies that focus on protecting against the penetration of digital networks and the theft, ransom, corruption or destruction of data.
Digital Infrastructure & Connectivity -The buildout and upgrading of our Networks, Data Storage Facilities, and Equipment.
Data Privacy & Digital Identity - Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
EPS Diplomats - Profitable large capitalization companies proven to produce above-average EPS growth and provide investors with the benefit of multiple expansion.
EV Transition - Capturing the transition to EVs and related infrastructure from combustion engine vehicles.
Guilty Pleasure – Companies that produce/provide food and drink products that consumers tend to enjoy regardless of the economic environment and potential long-term health hazards associated with excessive consumption.
Homebuilding & Materials – Ranging from homebuilders to key building product companies that serve the housing market, this model looks to capture the rising demand for housing, one that should benefit as the Fed returns monetary policy to more normalized levels.
Market Hedge Model – This basket of daily reset swap-based broad market inverse ETFs protects in the face of market pullbacks, overbought market technicals, and other drivers of market volatility.
Luxury Buying Boom - Tapping into aspirational buying and affluent buyers amid rising global wealth.
Market Hedge Model – This basket of daily reset swap-based broad market inverse ETFs protects in the face of market pullbacks, overbought market technicals, and other drivers of market volatility.
Nuclear Energy & Uranium – Companies that either build and maintain nuclear power plants or are involved in the production of uranium.
Precision Ag & Agri Science – Companies that look to address shrinking arable land by helping maximize crop yields utilizing technology, science, or both.
Rebuilding America - Turning the focused spending on rebuilding US infrastructure into revenue and profits.
Safety & Security – Targeted exposure to companies that provide goods and services primarily to the Defense and security sectors of the economy.
Space Economy – Companies that focus on the launch and operation of satellite networks.
The Strategies Behind Our Dividend Income Models
Monthly Dividend Model – Pretty much what the name says – this model invests in companies that pay monthly dividends to shareholders.
ETF Dividend Model – High-yielding ETFs that provide a range of exposures from domestic equities, international equities, emerging market equities, MLPS, and REITs.
ETF Enhanced Dividend Model – A group of high-yielding ETFs that utilize options to enhance yield through collecting option income.
Don’t be a stranger
Thanks for reading and if you have a suggestion for an article or book we should read, or a stream we should catch, email us at info@tematicaresearch.com. The same email works if you want to know more about our thematic and targeted exposure models listed below.