Management Conference Comments Take Center Stage
Plus the latest confirmation points better known as Model Signals
Yesterday’s May PMI reports showed a mixed picture of the domestic manufacturing economy but both provider’s figures showed inflation pressures in that part are not backing off and that job creation perked up compared to April. This factored into the latest downward revision in the Atlanta Fed’s rolling GDPNow model to 1.8% for Q2 2024, and places a greater focus on the May Non-Manufacturing PMI reports coming on Thursday. The market will be looking to see if that part of the economy has enough firepower to carry the overall economy, much the way it did in recent quarters. We’ll also be looking at data in the next few weeks to see if S&P Global’s sunnier view of the manufacturing economy is a more accurate representation than the contracting picture painted by ISM’s findings.
Clues for that will be scant today with only April Factory Orders and the April JOLTS - Job Openings report, both of which are out at 10:00 AM ET.
Inside quarterly results today from Bath & Body Works (BBWI), Designer Brands (DCI), PVH (PVH), and Sportsman’s Warehouse (SPWH), we’ll be looking to see if their comments about the consumer match those found in today’s Signals for our Consumer Inflation Fighter model. For our Cybersecurity and Digital Infrastructure models, we’ll be tuning into the earnings conference calls for CrowdStrike (CRWD) and Hewlett Packard Enterprise (HPE)after today’s market close.
In between the market open and those after the market close earnings calls, we and the larger market will be mining company presentations at investor conferences, including the Baird Global Consumer Technology Conference, the Deutsche Bank dbAccess Global Consumer Conference, and the William Blair Growth Stock Conference that are underway today. As we described in Monday’s The Week Ahead video, the nuggets being sought could tell us how the current quarter is tracing compared to company guidance issued in the last four to six weeks. Insights on 2H 2024 will also be on the hunting list.
MODEL SIGNALS
Artificial Intelligence
Revenue from AI semiconductors globally is expected to total $71 billion in 2024, an increase of 33% from 2023, according to the latest forecast from Gartner, Inc. “Today, generative AI (GenAI) is fueling demand for high-performance AI chips in data centers. In 2024, the value of AI accelerators used in servers, which offload data processing from microprocessors, will total $21 billion, and increase to $33 billion by 2028,” Read more here
“We don’t quite realize the impact that this is going to have in businesses and at work because it is just starting,” she said. “But what we’ve seen so far is that over a very short amount of time, these AI systems have entered the workforce as collaborators.” Read more here
Consumer Inflation Fighters
“Dine Brands’ customers are showing signs of being more price-sensitive, and more into deals than in recent quarters, Chang said. At Applebee’s in particular, diner checks with a promotion hit 28% for the first quarter, a high at least in the last year and up from 19% in the previous quarter and the mid-to high teens last year.” Read more here
“Dollar General has been struggling with budget-stretched Americans switching to less profitable consumables and unwilling to spend on non-essential items such as home goods and apparel. "Our customer continues to be very value-driven," CFO Kelly Dilts said on a post-earnings call. "We expect sales mix pressure to be above our original expectation." Read more here
“Amazon is slashing grocery prices by up to 30% in hopes of luring inflation-weary customers — following in the footsteps of other major retailers such as Target and Walmart. The company said that it will reduce prices of 4,000 items at its Amazon Fresh grocery stores online as well as at its handful of brick-and-mortar locations.” Read more here
Cybersecurity
“Live Nation confirmed in a regulatory filing with the U.S. Securities and Exchange Commission (SEC) on Friday that its subsidiary Ticketmaster has suffered a data breach… "Ticketmaster accounted for at least 70% of the total face value associated with all tickets sold at large arenas and amphitheaters." In stark contrast, "no other rival ticketed more than 14%." Read more here
Data Privacy
“Microsoft introduced a new series of products, named Copilot+ PCs, that are designed to be integrated with artificial intelligence technology in mind… But the new AI device features have raised privacy concerns. In particular, one feature that Microsoft refers to as“Recall” allows the device to take snapshots of a person’s screen every few seconds. These screenshots are encrypted and then stored locally on the individual’s device.” Read more here
EV Transition
“For every sign of an EV slowdown, another suggests an adolescent industry on the verge of its next growth spurt. In fact, for most automakers, even the first quarter was a blockbuster. Six of the 10 biggest EV makers in the US saw sales grow at a scorching pace compared to a year ago — up anywhere from 56% at Hyundai-Kia to 86% at Ford.” Read more here
Homebuilding & Materials
“The US housing market — long crippled by an inventory drought — is finally starting to see listings rise. But now, in many places, the buyers just aren’t showing up. Sellers are grappling with the fact that higher-for-longer rates are choking off demand during what’s typically the key season for the market. And more of those owners are cutting asking prices than any time since November 2022 as inventory grows stale, according to Redfin Corp.” Read more here
Safety & Security
“The number of NATO members meeting the military alliance’s defense spending benchmark could reach 23 nations this year — an all-time high prompted by the war in Ukraine, the U.S. permanent representative to NATO said Monday.” 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.