Fed Heads Follow Rebounding Manufacturing and Inflation Data
February JOLTs and Factory Order data on deck
Equity futures point to a lower market open later this morning, while the 10-year Treasury yield and oil prices continue to move higher. Both climbed in response to yesterday’s better-than-expected March Manufacturing PMI data from the US and China, and this morning we can add similar findings for the UK to that list. In the US, that improvement captured by both S&P Global and the Institute for Supply Management has the market once again questioning the start of potential rate cuts but also how many we could realistically see between now and the end of the year. While manufacturing activity and new orders rebounded, so did inflation data from both research firms, and as we like to say, that is something that won’t go unnoticed by the Fed.
While we have a modicum of economic data this morning, including February JOLTs data and Factory Orders, there is a bevy of Fed heads making the rounds, including John Williams, Loretta Mester, Mary Daly, and Michelle Bowman. Recently Atlanta Fed President Raphael Bostic shared he now expects just one quarter-point rate cut this year, and that was before yesterday’s data, figures that led the Atlanta GDPNow Model to be revised to +2.8% for the March quarter from 2.1%. We and the market will be listening to see if others follow Bostic’s line of thinking, hinting that one or two fewer rate cuts are likely in the coming months.
Should that be the telegraphed message, following the picture-perfect rise over the last few months, an increasingly overbought and euphoric market, the increasingly talked about pullback could emerge. For times like those, we have our Market Hedge model (see below) for more.
Health insurers, such as United Health (UNH) and CVS Health (CVS), are falling in premarket trading after the Centers for Medicare & Medicaid Services finalized the 2025 rate announcement for Medicare Advantage and prescription drug coverage. In 2025, payments from the government toward these plans are expected to rise 3.7% year over year, unchanged from an earlier proposed rate.
Shares of branded apparel company PVH (PVH) were hard hit in aftermarket trading last night following sharply lower EPS guidance of $2.15 versus the $2.58 market consnesus and the $3.72 reported for its January quarter.
Citigroup (C) implemented a fresh round of job cuts in its US investment bank last week as part of a restructuring, according to people familiar with the matter. Technology, media, and telecom were among the coverage areas hit hardest as well as equity capital markets, debt capital markets, financial sponsor coverage, and clean technology banking.
Rubrik, a Microsoft (MSFT) backed cloud and data security startup, has filed for an initial public offering.
Model Musings
CHIPs Act
“The United States will partner with Mexico to explore semiconductor supply chain opportunities, the State Department said on Thursday, as the Biden administration pushes to reduce reliance on China and Taiwan for the technology. The collaboration will take place as part of the U.S. CHIPS Act, a 2022 law that created a $500 million fund for developing the semiconductor supply chain through initiatives with allies and partners.” Read more here
Cloud Computing, Digital Infrastructure
"Cloud infrastructure spending continues to accelerate towards more robust configurations mainly fueled by the explosion of AI-related investments," said Juan Pablo Seminara, research director, Worldwide Enterprise Infrastructure Trackers at IDC. "Even though some caution remains on the socio-political side, the improvement in economic prospects contribute to a very positive spending outlook for 2024 and 2025 where cloud-based spending is expected to rebound at double-digit growth rates." Read more here
Cybersecurity
“MarineMax, self-described as one of the world's largest recreational boat and yacht retailers, says attackers stole employee and customer data after breaching its systems in a March cyberattack.” Read more here
“Data belonging to more than 1.3 million customers of the PandaBuy online shopping platform has been leaked, allegedly after two threat actors exploited multiple vulnerabilities to breach systems. PandaBuy allows international users to purchase products from various e-commerce platforms in China, including Tmall, Taobao, and JD.com.” Read more here
“Nearly a year on from the discovery of a massive data theft at healthcare biz Harvard Pilgrim, and the number of victims has now risen to nearly 2.9 million people in all US states…Names, physical addresses, phone numbers, birth dates, clinical information including lab results, and social security ID numbers were all compromised, Harvard Pilgrim said.” Read more here
“Reported data breach incidents rose by 34.5% in 2023, with over 17 billion personal records compromised throughout the year, according to Flashpoint’s 2024 Global Threat Intelligence Report. The firm recorded 6077 publicly reported data breaches last year, which included sensitive information such as names, social security numbers and financial data… The researchers also observed a 429% spike in stolen or leaked personal data in the first two months of 2024 compared with the same period last year, with 1897 billion personal records and credentials compromised.” 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.