The Stock Market is in a Holding Pattern Today
January inflation and February manufacturing data ahead later this week
US equity futures are pointing to a muted, but higher open. Because we have no market-moving economic data or earnings from companies that constitute a significant portion of any major market index, equity markets are in a holding pattern today. This won’t last long given tomorrow’s second look at 4Q 2023 GDP, Thursday’s January PCE Price Index data, and the rush of February Manufacturing PMI data on Friday. Taken together those pieces of data could either reaffirm or reshape expectations for the economy, potentially impacting rate cut expectations by the Fed.
Based on the February Flash PMI data from S&P Global (SPGI) and the preponderance of January inflation data that pushed against the softening narrative, this week’s coming data could push rate cut expectations into 2H 2024. So far, the surprising resilience of the US economy has allowed investors to feel comfortable shrugging off those concerns, however, if upcoming data suggests a different picture is on the horizon we could see investors selling into the gains generated since the market’s late October rally.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
Model Musings
Cloud Computing
“Amazon Web Services Mexico (AWS), a unit of Amazon.com Inc, announced on Monday it will invest over $5 billion to open a cluster of data centers in Mexico, amid growing demand for cloud services as more firms adopt new technologies. The cluster will be built in the Mexican state of Queretaro, Ruben Mugartegui, head of Amazon Web Services Mexico unit, told Reuters in an interview, adding the investment will be spread through the next 15 years.” Read more here
“The cloud unit of Chinese telecommunications equipment giant Huawei Technologies is wooing overseas industry clients and expanding its global footprint with new data centres, banking on the explosive demand for generative artificial intelligence (AI), despite US sanctions. Huawei plans to open a new local cloud service in Egypt next month, adding to its 85 availability zones across 30 regions globally… “ Read more here
“Alphabet’s Google Cloud has intensified its critique of Microsoft’s cloud computing strategies, accusing its rival of pursuing a monopoly that could stifle innovation, particularly in emerging fields like generative artificial intelligence. The scrutiny on Microsoft and Amazon’s dominance in cloud computing has heightened in various regions including Britain, the European Union, and the United States.” Read more here
Consumer Inflation Fighters
“The Irish discount carrier may receive fewer than 40 Boeing 737 Max jets before the end of June, Chief Executive Officer Michael O’Leary said. A shortfall of that magnitude would force Ryanair to cut its annual passenger forecast to 200 million people from 205 million for the coming fiscal year, he said at a media briefing in Dublin. Aircraft shortages are likely to drive up European fares this summer, O’Leary added, as competitors such as Wizz Air Holdings Plc and Deutsche Lufthansa AG ground planes to address an engine issue on some Airbus SE jets.” 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.