Tesla Earnings, 4Q 2023 GDP, Model Musings
January 25, 2024
As we write this morning’s Signals, US equity futures point to a mixed market open as they contend with pressure on Tesla (TSLA) shares following last night’s latest earnings report. The company reported December quarter EPS of $0.71, missing the $0.73 consensus, on revenue that rose 3.5% YoY to $25.17 billion, also missing the consensus forecast. While deliveries rose 20% to 484,507 for the quarter, Tesla’s gross margin plummeted to 17.6% compared to 23.8% in the year-ago quarter. For the coming year, Tesla shared vehicle volume growth rate may be notably lower than compared to 2023’s growth rate as its teams work to launch the next-generation vehicle at Gigafactory Texas.
Readers will want to revisit US equity futures once this morning’s first take on 4Q 2023 US GDP is published at 8:30 AM ET. That first look is expected to slow considerably to 2%, down from 4.9% in 3Q 2023, matching the economy’s speed in 1H 2023 but not suggesting it is in danger of slipping into a recession. As we get this initial GDP print, the market will consider the stronger-than-expected Flash January Manufacturing and Service PMI data from S&P Global (SPGI) yesterday. That report not only showed manufacturing activity bounced back and was growing again in December, but the broad-based upturn in order activity it recorded suggests the economy’s renewed vigor at the start of the year should continue.
Tucked inside the initial 4Q 2023 GDP report is the preliminary 4Q 2023 reading on PCE Prices, including the core figure. While the data is coming ahead of tomorrow’s December PCE Price Index figures, inflation and Fed watchers alike will parse size up what is revealed today against the October and November PCE data. Barring a dramatic fall in December, the October and November core PCE prints of 3.388% and 3.15% suggest the preliminary 4Q 2023 core PCE Price figure will still show quite a distance to the Fed’s 2% target.
Should all the above come in as expected, it argues the Fed does not need to race toward cutting interest rates, yet the market still sees 5-6 rate cuts coming before we close out 2024. That sets the tone for the Fed to once again deliver some sobering talk to the market when it concludes its next policy meeting on January 31.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
Model Musings
Aging of the Population
“Multigenerational homes are on the rise, according to research by the National Association of Realtors, and not just adult children moving home. Many are aging parents moving in with their adult children. Another reason older homeowners are choosing to age in place, instead of downsizing, moving to warmer climates or choosing to embrace senior living settings, is because they’re renovating their homes to make that possible, often addressing the onset of physical limitations.” Read more here
Digital Infrastructure & Connectivity
“InterDigital (IDCC) announced that it has joined Princeton University's NextG Initiative, dedicated to corporate partnerships advancing technology, policy, and industry-academia-government partnerships related to wireless, cloud, and networks of the future. The NextG Initiative, led by Princeton's School of Engineering and Applied Science, supports the foundation for future intelligent networks across wireless, networking, and cloud systems. The initiative will focus on cross-disciplinary approaches that utilize new algorithms and AI approaches to make networks scalable, efficient, secure, and accessible.” Read more here
Homebuilding & Materials
As part of his portfolio management duties for TheStreet, Chris Versace recently reconnected with Jack Truong, former CEO of James Hardie and Electrolux North America. While the conversation starts off talking about expectations for Fed rate cuts this year, it quickly turns to the U.S. housing market with Jack sharing why he is bullish on the housing market long-term, but he sees several headwinds that could restrain it over the coming quarters.
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.
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.