The VIX, Treasuries, and Earnings
We have a bevy of reports coming, bringing ample updates for several of our models.
Coming off the somewhat unexpected boost to the Atlanta Fed’s GDPNow model to 2.9% for the current quarter following ISM’s July Non-Manufacturing Index on Tuesday, we have yet another empty day of fresh economic data. And with only one Fed speaker on the docket - Richmond Fed President Tom Barking at 3 PM ET, the market’s focus will remain on quarterly earnings today and the ongoing unwinding of the global carry trade. According to JPMorgan Chase, three quarters of that carry trade has yet to be undone.
Even as some of that uncertainty plaguing the market fades further, readers will also want to keep one on the Volatility Index (VIX) and the other on 10-year Treasury yields. With the Fear & Greed Index still signaling “Extreme Fear”, the last few days have seen the VIX on a roller coaster ride with the market moving in the opposite direction. That inverse relationship explains some of yesterday’s market sell-off following what started out a continuation of Tuesday’s market recovery as the VIX.
On the earnings front, we have a full plate today with more than 700 companies reporting. Following CrowdStrike’s(CRWD) recent debacle, we’ll be interested in comments from CyberArk (CYBR) about potential market share shifts for the holdings inside our Cybersecurity model. While wet 2Q 2024 weather was a thorn in the side of construction projects, the outlook from aggregates company Martin Marietta (MLM) and Advanced Drainage Systems (WMS)should be constructive (see what we did there) for our Rebuilding America model.
As it relates to our Aging of the Population model, we’ll be checking in with AMN Healthcare (AMN) after the market close. And with an eye toward the consumer and our Cash-Strapped Consumer model, we’ll be parsing results and guidance from Capri Holdings (CPRI), elf Beauty (ELF), Expedia (EXPE), Funko (FNKO), Under Armour(UAA), and Restaurant Brands (QSR) to get an updated view on the increasingly selective consumer.
Model Musings
Artificial Intelligence, Cybersecurity
“IBM has added generative artificial intelligence (AI) capabilities to its managed threat detection and response services. Built on the company’s watsonx data and AI platform, the new IBM Consulting Cybersecurity Assistant is designed to speed and improve the identification, investigation and response to critical security threats” Read more here
Cash-Strapped Consumer
“While CPG brands maintain that consumers are choosing name brands, shoppers continue to exhibit high levels of deal-seeking behavior when making larger purchases such as home furnishings. Kate Gulliver, chief financial officer and chief administrative officer of home goods eCommerce retailer Wayfair, noted on an earnings call Thursday (Aug.1) that the company has seen shoppers still holding off until sales periods to make purchases.” Read more here
“Although inflation has slowed, nearly one third (30%) of respondents have been cutting back spending due to concerns about the economy and over two in five (42%) of respondents have altered their financial priorities over the past year. Among those whose priorities have shifted, 27% report covering daily living expenses such as groceries and utilities is the priority that has changed the most.” Read more here
Data Privacy
“In a recent U.S. YouGov survey commissioned by Aloha Browser, 84% of respondents cited online privacy as a fundamental human right, while 74% felt threatened by the potential of Artificial Intelligence (AI) to "destroy" their privacy. 53% of respondents cited "Privacy, Safety and Security" as their #1 concern with AI.” Read more here
“On the back of its continued blocking of Instagram since Friday, Türkiye has now blocked some 27 options for Turkish citizens looking to access the social media site, or any geo-restricted part of the internet.“ Read More Here
Digital Lifestyle
“Apple has apparently been in discussions with the UK's Broadcaster's Audience Research Board (BARB) to explore the necessary data collection techniques for monitoring advertising results… While BARB already monitors viewing time for Apple TV+ content, additional techniques are required to track advertising metrics accurately. This data is vital for advertisers to assess the reach and impact of their campaigns on the platform. In addition to the UK, Apple has also reportedly held similar discussions with ratings organizations in the United States.” Read more here
EV Transition
“Pew Research Center survey paired with an analysis of U.S. Department of Energy data finds that roughly six-in-ten Americans now live within 2 miles of a public charger. There were over 61,000 publicly accessible electric vehicle charging stations in the United States as of February 2024.“ Read More Here
Homebuilding & Materials
“The average rate on the popular 30-year fixed mortgage dropped 22 basis points to 6.4% Friday, according to Mortgage News Daily. That is the lowest rate since April 2023. The 15-year fixed rate fell to 5.89%, its lowest level since early May 2023.” Read more here
Space Economy
“For a long time, it seemed almost certain that the astronauts would return to Earth inside Starliner. However, there has been a lot of recent activity at NASA, Boeing, and SpaceX that suggests that Wilmore and Williams could come home aboard a Crew Dragon spacecraft rather than Starliner. Due to the critical importance of this mission, Ars is sharing what we know as of Thursday afternoon.“ 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.
Cash Strapped Consumer - Companies poised to benefit as consumers stretch the disposable spending dollars they do have.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.
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.
Digital Lifestyle - The companies behind our increasingly connected lives.
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.
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.