Nvidia Delivers, Flash May PMI and Inflation Comments Up Next
Plus signals for 10 of our targeted exposure models!
Because Nvidia (NVDA) shares account for about 5.3% of the S&P 500 and around 8.5% of the Nasdaq Composite, its beat and raise quarter is lifting equity futures this morning. Nvidia also declared a 10-to-1 stock split effective June 7. For the current quarter, Nvidia sees its top line rising to $28 billion plus or minus 2%, well ahead of the $26.8 billion market forecast and the $13.5 billion posted in the July 2023 quarter.
Yesterday’s publication of the Fed’s May FOMC meeting minutes didn’t have anything new, but they did reinforce the Fed's "high-for-longer" stance. To us, the more important Fed comments post-April CPI report were made on Tuesday by Fed Governor Chris Waller, who said more evidence of slowing price growth over the next three to five months would allow for the lowering rates by the end of the year.
The Fed meeting minutes did remind the market that the central bank remains data dependent, and that should put today’s Flash May PMI report out at 9:45 AM ET in focus. We’ll be reviewing the data for what it says about input and output cost inflation, looking to see if it suggests we could see another leg down in core CPI data with the May report. If it does, it would likely help the market rebound from yesterday’s post-Fed meeting minutes sell-off. We’ll want to see if this morning’s report softens rate cut timing comments from Atlanta Fed President Raphael Bostic when he speaks at 3 PM ET. Given his comment that we shared above, the same goes for Fed Governor Waller when he speaks tomorrow morning.
With US equity markets closed on Monday for the Memorial Day holiday, the next edition of Thematic Signals will be published on Tuesday, May 28.
Model Musings
Aging Population
“Media executives say advertisers should take into account a host of social changes when assessing the value of reaching older audiences. Life expectancy is longer, and people are starting households later than they used to, meaning they might not have settled on whether they will favor, say, Dove or Pantene or Suave shampoo. Many older people also have more disposable income… Median household net worth for adults 65 and older rose 7% between 2017 and 2023, according to a September report from Cunningham’s organization. The same report showed that 50% of adults over 65 aren’t cutting back on buying name-brand products because of economic uncertainty and inflation.” Read more here
Artificial Intelligence
“… many health systems are increasingly prioritizing AI initiatives, with experts predicting that generative AI will continue to make a splash in healthcare. A recent survey commissioned by Wolters Kluwer Health found that physicians are cautiously optimistic about generative AI, while a report from John Snow Labs revealed that healthcare and life sciences organizations are increasingly investing in the tools.” Read more here
“Microsoft Corp. is creating a version of its Copilot assistant that will help groups of workers collaborate, extending a company-wide push to infuse products with artificial intelligence. Team Copilot, announced on Tuesday, will serve as a designated meeting minder, taking notes, summarizing the most important information and tracking deadlines. The AI assistant will roll out to corporate customers later this year, Microsoft said on the first day of Build, its conference for developers.” Read more here
CHIPs Act
“South Korea announced on Thursday a 26 trillion won ($19 billion) support package for its chip businesses, citing a need to keep up in areas like chip design and contract manufacturing amid 'all-out warfare' in the global semiconductor market.” Read more here
Cloud Computing
“Cloud has long been a regular feature in any modern companies’ tech stack, and this year’s research exemplifies how this remains the case as businesses across industries manage a challenging economic climate. With cloud services more or less ubiquitous now, attention should turn to where businesses can maximise its potential, particularly in crucial areas such as AI and ESG.” Read more here
Consumer Inflation Fighters
“The consumer’s purchasing power is limited,” Sleep Number CEO Shelly Ibach told analysts late last month. “As a result, consumers continue to scrutinize their spending and make near-term decisions based primarily on need, price and perceived value. And they are deferring higher-ticket, durable purchases.” Read more here
“Comparable sales, those from stores and digital channels operating at least a year, fell 3.7% in the three months ended May 4, the fourth consecutive quarter of declines. Sales of home goods, furniture, apparel and food fell compared with the same period last year, said executives. High prices are straining wallets and shoppers continue to consume more services, which eats into their spending on other purchases, said Target Chief Executive Brian Cornell.” Read more here
Cybersecurity
“A recent hack of legal services provider Stretto Inc. that compromised Celsius Network LLC customer information was wider than previously known, affecting at least four firms in all…
The breach is the latest in a string of attacks targeting customers of bankrupt crypto platforms and firms like Stretto that have been hired to administer these large Chapter 11 cases.” Read more here
Digital Infrastructure & Connectivity
“Microsoft Corp. and G42, the United Arab Emirates’ top artificial intelligence firm, are joining forces to build a $1 billion geothermal-powered data center in Kenya, the initial phase of a multiyear plan to dramatically increase cloud-computing capacity in East Africa.” Read more here
EV Transition
“The time it’s taking for some of China’s electric-car makers to pay suppliers is ballooning — a further sign of stress in the nation’s increasingly cutthroat auto market. Nio Inc. was taking around 295 days to clear its receipts payable, the vast majority of which are owed to suppliers, at the end of 2023 versus 197 days in 2021, according to the most recent available data compiled by Bloomberg. Xpeng Inc., another US-listed Chinese EV maker, was taking 221 days to honor its obligations to vendors and related parties, up from 179 days, the data show.” Read more here
Precision Ag & Agri Science
“In the world of precision farming, the timeless tradition of cultivation is elevated through the introduction of cutting-edge technology. This approach transforms the agricultural landscape into a finely tuned mechanism, with each element playing a critical role. All that to ensure zone-specific crop monitoring and management, catering to the needs of each acre instead of a one-size-fits-all tactic. Within this sophisticated framework, farmers harness the power of advanced data analytics, satellite imagery, and the precision of Global Positioning Systems (GPS) alongside Geographic Information Systems (GIS). This combination of technologies and tradition allows for an unprecedented level of control and customization in farmland management.” Read more here
Safety & Security
“Russia’s invasion of Ukraine more than two years ago jolted Europe out of complacency about military spending. After defense budgets were cut in the decades that followed the Soviet Union’s collapse, the war has reignited Europe’s efforts to build up its own military production capacity and near-empty arsenals.” 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.