Just a quick note before we get started today. This week we added two new models - Homebuilding & Building Products and the Market Hedge Model - and replaced one of the Dividend Income ones with the Monthly Dividend Model. Descriptions for all three are found below. Thanks, and please proceed as you normally would.
Aside from Energy which rose 1.63%, Utilities was the only positive sector, posting a 0.34% gain. Yesterday’s release of recent Fed meeting minutes and the “uncertainty” that was discussed weighed on equities, extending Technology’s (-1.02%) recent losing streak and putting pressure on all other sectors. Leading the pullback were Real Estate (-2.37%) and Consumer Discretionary (-2.02%). As expected, broad market indexes reflected this activity with the Dow falling 0.76%, the S&P 500 dropping 0.80%, the Nasdaq Composite shedding 1.18% and the Russell 2000 closing 2.66% lower.
ADP and Challenger Bring the First Look at December Jobs
Equities look to bounce back following their sell-off over the last few days, which dashed the expected Santa Claus Rally. Following yesterday’s December Manufacturing PMI from ISM that led to upward GDP forecasts for 4Q 2023 and the more hawkish than expected leaning Fed meeting minutes, if this morning’s data shows the US economy remains solid and inflation pressures aren’t receding as quickly as expected, it will be another push back on 1H 2024 rate cut expectations.
At 7:30 AM ET, the December Challenger Job Cuts Report will be out, and it will be followed by the December Employment Change Report at 8:30 AM ET. The market expects ADP’s findings will show 115,000 jobs created during the month, up from 103,000 in November. A meaningful print above 115,000 would corroborate the upward revisions in GDP expectations while a hot one would signal a potentially stronger-than-expected December Employment Report on Friday. The current consensus forecast sees that report showing 170,000 jobs added during the month, down from 199,000 in November, with hourly wages up 3.9% YoY.
Soon after the market opens, at 9:45 AM ET, S&P Global will publish its December US Services PMI, and the headline figure is forecasted to come in at 51.3, up from November’s 51.0. Here as well, a stronger finish to 2023 for the Service sector would suggest the Fed doesn’t need to rush rate cuts. Following the upturn in inflation found in S&P Global’s final December US Manufacturing PMI report, pricing, and inflation comments in S&P’s findings for the Service sector will be a focus for the market.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
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.
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.
Nuclear Energy & Uranium – Companies that either build and maintain nuclear power plants or are involved in the production of uranium.
Luxury Buying Boom - Tapping into aspirational buying and affluent buyers amid rising global wealth.
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.