Bostic’s Wake Up Call, More Fed Heads Today
Atlanta Fed President Bostic now sees just one rate cut in 2024
Equity futures point to a lower open this morning as the market feels the sobering bucket of water thrown at it late Friday from Atlanta Fed President Raphael Bostic. Shortly after the stock market closed out its latest winning week, Bostic shared he now projects just one interest-rate cut this year, adding that reduction will likely happen later in the year than he previously expected.
Should we be surprised following the March Flash US PMI report out last Thursday that found “Respective rates of output price inflation accelerated sharply across both manufacturing and services, quickening to 13- and eight-month highs as companies passed through higher input costs to their customers.”
No, no we should not.
We should also remember Bostic was already calling for just two rate cuts, not the current potential three reiterated by the Fed’s latest set of economic projections published last Wednesday. Today we have not only additional comments from Bostic before the market opens, but also Chicago Fed Austin Gooslbee (9:05 AM ET), and Fed Governor Lisa Cook(10:30 AM ET). No doubt the market will be looking to see if Goolsbee and Cook match Bostic’s tone, but it’s hard to see how they won’t simply because the March Flash PMI data follow Fed Chair Powell’s comment the January and February inflation data did little to bolster the Fed’s confidence inflation was progressing toward its 2% target.
This means the shortened week could very well bring the sobering remarks we were expecting last week about rate cuts and their timing.
In last week’s TheStreet Pro Podcast, noted technical analyst Helene Meisler shared the stock market was overbought and sentiment was running high. Meisler also shared that the S&P 500 has been in a channel between 5,100-5,300 and with a quiet, shortened trading week as well as those simultaneous conditions, we could see the market give back some of its recent gains.
Because US equity markets are closed for Good Friday, it means one of the higher profile economic data points, the next reading for the closely watched PCE Price Index will be published when the market is closed. That same data Fed Chair Powell will also be speaking, and this should tell us that as the market gets ready for the March quarter earning season, the outcome of those events will set the tone for the start of 2Q 2024.
Model Musings
Consumer Inflation Fighters
“A higher cost of living, coupled with lower starting wages and student debt, is making it challenging for many to budget. This can delay important financial milestones like buying a house and saving for retirement. And it increasingly means young people are relying on the bank of mom and dad for longer, or even “doom spending” to soothe their economic despair.” Read more here
Digital Infrastructure & Connectivity, Nuclear Energy & Uranium
“More than 20 executives from Amazon and Microsoft spoke on panels. The inescapable topic—and the cause of equal parts anxiety and excitement—wasAI’s insatiable appetite for electricity. It isn’t clear just how much electricity will be required to power an exponential increase in data centers worldwide. But most everyone agreed the data centers needed to advance AI will require so much power they could strain the power grid and stymie the transition to cleaner energy sources. Bill Vass, vice president of engineering at Amazon Web Services, said the world adds a new data center every three days.” Read more here
Guilty Pleasure
“As you may have heard, the baby boomers are now getting kind of old (the youngest turn 60 this year, the eldest 78), and while the first two years of the pandemic did bring new wine-consumption records in the US, those appear to have been anomalies. Per capita consumption fell back to roughly 2015’s level in 2022 and almost certainly declined again in 2023. As Rob McMillan of Silicon Valley Bank (yes, it lives on, as a division of North Carolina’s First-Citizens Bank & Trust Company) has been pointing out for years in his excellent annual State of the US Wine Industry reports, each of the US age cohorts that has the followed the baby boom has been less into wine than the previous one. The wine slump is even more pronounced globally, with total (that is, not per capita) consumption down 7% since peaking in 2007.” Read more here
“Drinkers guzzled whiskey and other spirits during the pandemic, driving banner sales growth for Brown-Forman and other distillers, but the party has ended. Whiskey makers’ revenue in the U.S. fell 2.2% in 2023 to $12.3 billion, according to the Distilled Spirits Council of the United States, while revenue was flat overall for makers of spirits.” 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.
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.