How Will November Retail Sales Impact the Fed’s Thinking?
As the Fed kicks off its December policy meeting, updated GDP expectations are on the way
Even though the stock market has once again entered short-term overbought territory, futures point to equities at least starting today’s trading in the red, adding to the Dow’s longest losing streak since 2018. The November Retail Sales report, out at 8:30 AM ET, has the potential to alter those futures especially if the figures show consumers opened their wallets more than expected. Based on data from Adobe Analytics (ADBE) and Salesforce (CRM), we should see a strong showing for non-store retail sales, Census Bureau speak for digital shopping, and that would be a nice confirmation point for our Digital Lifestyle strategy.
With November Retail Sales ex- autos and ex-gas only expected to inch up 0.1% compared to October, a meaningfully stronger print paired with yesterday’s December Flash PMI from S&P Global has the potential to cement a slower approach to Fed rate cuts in 2025. The reason behind that lies in what we are likely to see today when the Atlanta Fed’s GDPNow model is updated for the first time since December 9. That last reading pegged GDP for the current quarter at 3.3%, and a revision near that would affirm Fed Chair Powell’s recent comment the economy is stronger than the Fed expected back in September.
Given the likely outcome, we’re not surprised that yesterday, Goldman Sachs excised its projection for a January rate cut. The firm is still more dovish than the rest of the market with its call for rate cuts in March, June, and September 2025, but based on the Fed’s updated set of economic projections tomorrow afternoon further revisions to its outlook, as well as that from others, is likely.
In yesterday’s The Week Ahead video, we shared our view that if the Fed outlook for rate cut matches those for the market, we are likely to see another sigh of relief rally like the one we saw following the November CPI report. However, if the Fed’s message is more hawkish than expected, market watchers will be closely watching the S&P 500 and key support levels near 6,020 and 5,913. Moves lower near those levels would make the market even more short-term oversold, and that could bring folks looking to capitalize on the expected Santa Rally.
While we navigate the coming days, we’ll continue to focus on the structural changes captured in our targeted exposure models, especially given the confirmation points we continue to see and share below.
Model Musings
Artificial Intelligence, Digital Lifestyle
“Since Cyber Monday (Dec. 2), retailers have increased their use of generative AI and agents by 23% week-over-week. Salesforce predicts that AI is on track to influence upward of $200 billion in holiday sales for the full holiday season, a 12% year-over-year increase.” Read more here
Cybersecurity, Data Privacy
“Stoli, a top vodka brand with a presence across the world, filed for bankruptcy last week - with an apparent cybersecurity incident among the reasons. In the bankruptcy filing, the company listed many reasons for its financial failings, including legal disputes with the Russian government, the country’s confiscation of two distilleries worth around $100 million, and a ransomware attack that allegedly happened in August 2024.” Read more here
“Microsoft has announced its intention to eliminate passwords for over a billion users, marking a pivotal step in digital security. Declaring that “the password era is ending,” the company cautioned users about the rise of password-related attacks, stating, “Bad actors know it, which is why they’re desperately accelerating these attacks while they still can.” The move underscores Microsoft's commitment to replacing passwords with more secure, phishing-resistant alternatives like passkeys.” Read more here
“Photobucket was sued Wednesday after a recent privacy policy update revealed plans to sell users' photos—including biometric identifiers like face and iris scans—to companies training generative AI models. The proposed class action seeks to stop Photobucket from selling users' data without first obtaining written consent, alleging that Photobucket either intentionally or negligently failed to comply with strict privacy laws in states like Illinois, New York, and California by claiming it can't reliably determine users' geolocation.” Read more here
Digital Lifestyle
“The most advanced phones on the market come with the promise of making your life easier with new generative AI features, including composing texts, creating images from prompts and removing unwanted people or things from your photos. Now, the tech industry has set its sights on the next generation of artificial intelligence as companies begin to hype up so-called agentic AI -- in other words, AI agents catering to your needs -- that they say will change how we use devices with novel suggestions, recommendations and other ways to truly become bonus brains.” Read more here
”The global advertising industry will surpass $1tn in revenue for the first time this year, with Google, Meta, ByteDance, Amazon and Alibaba expected to earn more than half the total in a market dominated by the technology sector.” Read more here
Digital Payments
“In an age where relationships with banks are nearly ubiquitous — the Federal Reserve noted last month that just about 96% of households have at least some form of checking or savings account with a bank or credit union — the move toward direct account-to-account (A2A) flows should be an intuitive one. But it hasn’t been, at least not yet, though the rise of open banking promises to change that.” Read more here
Luxury Buying Boom
“Capri Holdings (NYSE:CPRI) shares rose as much as 7% in premarket trading on Monday after Women’s Wear Daily (WWD) reported that the company is exploring potential buyers for its Versace and Jimmy Choo brands, working with Barclays (LON:BARC) to facilitate the process.” Read more here
“With their sector facing a downturn, luxury brands are reportedly pinning their hopes on outlets… retailers, and landlords and real estate investors are all banking on the idea that shoppers still want higher-end goods, as long as they can pay lower-end prices. So while foot traffic remains at pre-COVID levels, retailers have begun leasing more space at outlet shopping centers, where designers can sell surplus at steep discounts.” Read more here
Safety & Security
“Security camera company Verkada Inc. is raising $200 million at a valuation of $4.5 billion, a significant premium over its last funding round, according to people familiar with the matter… The shooting of UnitedHealth Group Inc. executive Brian Thompson earlier this month has driven more interest in physical safety precautions, including services like those sold by Verkada, as corporations look to enhance security measures.” 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.
Cash Strapped Consumer - Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
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.
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.
Data Privacy & Digital Identity - Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
Digital Infrastructure & Connectivity -The buildout and upgrading of our Networks, Data Storage Facilities, and Equipment.
Digital Lifestyle - The companies behind our increasingly connected lives.
Digital Payments - This model focuses on companies benefitting from the accelerating structural adoption of digital payments and financial technology (FinTech).
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.
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.
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 above.