April 1: A Big Week for Data
Introducing our Cybersecurity model... finally
Here comes Cybersecurity
Heads up folks, once again we are expanding our model offering with the introduction of our Cybersecurity offering. With high thematic purity, this model captures those companies that focus on protecting against the penetration of corporate digital networks and the theft, ransom, corruption, or destruction of data. Much the way our Digital Infrastructure model benefits from the increasingly digital and connected world, the companies in this model secure and defend it.
A Big Week for Data
After reviewing the in-line February PCE report, we agree with comments from Fed Governor Waller and Fed Chair Powell there is no rush for the Fed to begin cutting interest rates based on the totality of recent data. Especially when the economy remains, as Powell put it, strong. While the February PCE data was constructive, we do not think the central bank will hang its hat on any one report. Instead, it will want to see multiple measures of inflation moving together toward its 2% target, not the conflicting views found across the February data. As we suspected, Powell’s Friday comments reiterated the need to see more “good data” before the Fed begins a rate-cutting cycle.
Last night we learned the Caixin China General Manufacturing PMI increased to 51.1 in March from 50.9 in the previous month, beating market estimates of 51. It was also the fifth straight month of growth in factory activity and the fastest pace since February 2023, boosted by higher new domestic and international orders.
Later this morning, ISM and S&P Global will publish their final March Manufacturing PMI reports with their Services counterparts coming later this week. Today’s headline and new order data will clue us into the strength of the manufacturing economy while the data later this week will do the same for the Services sector, the one that has been driving the bulk of US economic growth. We will compare the figures from S&P Global and ISM, especially for the manufacturing economy because of the very different expectations - while expectations for ISM’s March manufacturing data call for a continued contraction in that part of the economy, the forecast for S&P Global’s manufacturing figures is a return to growth. If both March manufacturing headline figures cross the expansion-contraction line of 50, they would bolster the current picture of the US economy and be another data point toward a slow-walking Fed when it comes to the start of rate cuts.
The insights on inflation and job creation to come from those reports will also be helpful ahead of the March Employment Report later in the week and the soon-to-be-upon published March CPI and PPI reports. Because the data found in those January and February PMI reports were good indications for what we’ve seen in the January and February CPI and PPI reports, it stands to reason this week’s data may provide an important signal when it comes to rate-cut timing. Ahead of reviewing those coming insights, we still think the timing for the first rate cut will slip into H2 2024, and the probability of less than the three rate cuts shown in the Fed’s latest set of economic projections is rising.
In addition to those reports, today also brings the February Construction Spending report, which we will be scrutinizing because of our Rebuilding America and Homebuilding & Materials models - see below for more on those and our other models.
Model Musings
Artificial Intelligence
"Chipmaker Nvidia sees big opportunities in healthcare AI and this week it launched more than two dozen new gen AI-powered microservices. The global computing powerhouse also inked collaborations with Abridge, Microsoft, GE HealthCare and Hippocratic AI to to expand its generative AI capabilities into healthcare and life sciences.” Read more here
“The artificial intelligence firm NVIDIA and the health intelligence company Hippocratic AI are developing “healthcare agents” to engage in remote conversations with patients. “We can help mitigate widespread staffing shortages and increase access to high-quality care – all while improving outcomes for patients,” says Hippocratic AI cofounder and CEO Munjal Shah.” Read more here
Cybersecurity
“AT&T said it reset the passcodes of about 7.6 million account holders whose personal information was leaked on the dark web after a data breach. The affected data set, which also includes information from more than 65 million former account holders, was leaked onto the dark web about two weeks ago…” Read more here
EV Transition
“Stellantis Chief Executive Carlos Tavares in February made an intriguing announcement: The Chrysler-parent company would remain all-in on electric vehicles, even as competitors scale back and sales growth slows. “We’re going flat out,” he told analysts on the company’s earnings call.” 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.