Powell Says Fed Funds Rate At Its 'Peak' But...
He still expects a pivot to interest rate cuts this year
Yesterday during his first day of back-to-back testimony in Washington, Fed Chair Powell signaled the policy rate is at its “peak for this tightening cycle," although he indicated that the central bank is not ready to begin cutting rates immediately Powell shared that he still expects a pivot to interest rate cuts this year. Powell will resume his testimony today at 10 AM ET, reiterating that perspective, which means we have little in the way of market-moving news this morning, leaving the market to relish that the expectation for rate cuts is not a matter of “if” but “when”.
Other Fed Speakers today include Cleveland Fed President Loretta Mester (11:30 AM ET and 1:20 PM ET), and odds are they will back comments made during Powell’s testimony. After today’s market close, we will have a wave of potentially market-moving earnings reports from Broadcom (AVGO), Marvell (MRVL), and Costco (COST) given what they may signal about the smartphone and data center markets as well as the consumer.
Exports from China surged 7.1% YoY to $528.01 billion in January-February 2024 combined, following a 2.3% gain in December 2023 and beating market forecasts of a 1.9% rise, signaling that global trade is starting to recover. Imports to China rose 3.5% YoY to $402.85 billion in the combined January-February 2024, beating market forecasts of a 1.5% growth and quickening from a 0.2% rise in December due to strong domestic demand during the year-end and Lunar New Year holidays.
The US House of Representatives passed legislation funding a broad swath of the federal government through the fiscal year that began in October, as yet another threat of a partial shutdown looms. It now goes to the Senate for passage by Friday, before a midnight deadline when temporary funding expires for several Washington agencies.
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Model Musings
Aging Population
“In the final three months of 2023, over 11,000 senior housing units were absorbed on net, a five-quarter high and far exceeding the trailing three-year average of 8,500 units per quarter. This allowed nationwide occupancy to reach 84.3 percent, according to NIC Map Data Service, just 110 basis points shy of its pre-pandemic baseline… the demographic of Americans aged 75 or more years is expected to increase by almost 11 million over the next 10 years… By contrast, during the past decade, the population of people aged more than 75 years saw an increase of less than 6 million.” Read more here
Artificial Intelligence
“60% of small business owners expect to increase their budget this year, with 50% planning to allocate that budget toward technology and infrastructure… When asked what these new technologies were, small business owners were most likely to have implemented technology for AI (50%), productivity or collaboration (41%), or communication (34%).” Read more here
CHIPs Act
“The US government is poised to invest $3.5 billion in Intel Corp. so the chipmaker can produce advanced semiconductors for military and intelligence programs, according to congressional aides… It comes from a broader $39 billion Chips and Science Act grant pool that’s designed to convince chipmakers to produce semiconductors in the US.” Read more here
Rebuilding America
“$9.9 billion in federal formula funding, part of the largest investment in public transit in U.S. history, is available to support public transportation in communities throughout the country… The funding will help communities maintain and operate trains, buses, and ferries; upgrade stations and tracks; plan and design new transit corridors; and provide access for seniors and riders with disabilities.” 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.