March 22: Will the Market Melt-up Continue?
The largest outlfow from stock funds since December 2022, the market flirts with being overbought
Following another record-setting day for the stock market’s major averages, and no pre-market developments on either the earnings front or the economic data calendar, the market melt-up looks to continue. We would note, however, that as the market has put in these fresh highs, it once again flirts with being overbought as investor sentiment flashing “Extreme Greed” per the Fear & Greed Index. This helps explain the largest outflow of funds, nearly $22 billion, since late 2022 for US stocks for the week ending Wednesday, March 20.
Helping the market melt-up was the Fed’s updated economic projections that continued to show the central bank penciling in 3 rate cuts this year. However, Fed Chair Powell pointed out January and February inflation data did not bolster the Fed’s confidence we are moving closer toward its 2% target.
And if the Fed is truly being data-dependent in its thinking, it will not like what was revealed in yesterday’s US Flash March PMI report from S&P Global -“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.”
We will want confirmation in the final version of the data as well as the corresponding March report from the Institute for Supply Management, but today the market may not like what Fed Chair Michael Barr has to say should he touch on those findings. And with that, readers may want to review the description below for the Market Hedge Model.
Model Musings
Artificial Intelligence
“Microsoft is gearing up for its “year of the AI PC” with two new Surface devices that won’t be sold directly to consumers. The Surface Pro 10 for Business and Surface Laptop 6 for Business both feature Intel’s latest Core Ultra processors, Microsoft’s new Copilot key, and a Neural Processing Unit (NPU) to accelerate some existing and upcoming AI-powered features in Windows 11. Microsoft is calling them “the first Surface AI PCs built exclusively for business.” Read more here
Cloud Computing
“Tencent Holdings Ltd. is looking to expand its cloud business in Saudi Arabia and the United Arab Emirates, in a bet that a focus on developing industries including artificial intelligence in the Middle East will require huge new investments in data storage.” Read more here
Consumer Inflation Fighters
“Evidence is mounting that many Americans have reached their limit for tolerating higher prices, raising questions about how much consumer expenditures will continue to power US economic growth this year. After spending freely with savings built up during the coronavirus pandemic and income fuelled by a healthy job market, consumers are becoming more cautious, according to comments from retail and consumer goods executives and official data.” 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.