The Week Ahead
The Road to Powell and February Jobs Data
Once again the week begins on a quiet note given the lack of fresh economic data and corporate earnings reports being shared today. We would suggest you enjoy the breather today because we are in for a snoot full of key economic data later this week that spans February Service PMI reports and a few looks at February job creation ahead of Friday’s February Employment Report. Several pieces of those data will overlap with Fed Chair Powell’s semiannual monetary policy testimony to a House committee on Wednesday and a Senate panel on Thursday.
Powell is expected to double down on his message that there’s no rush to cut interest rates. That message is backed by the preponderance of January inflation data and comments in the February Manufacturing PMI reports that questioned the rate of progress toward the Fed’s 2% target. Should tomorrow’s February Service PMI reports echo the inflation comments from their manufacturing counterparts, the market will be reading Powell’s comments to see if rate cut expectations are moving into 2H 2024. We will be listening closely to Powell’s in anticipation of the Fed updating its Economic Projections come the conclusion of its March policy meeting on March 20.
Earnings to watch this week include retail giants Costco (COST), Target (TGT), JD.com (JD), Ross Stores (ROST) and Kroger (KR). Broadcom (AVGO), DocuSign (DOCU), and CrowdStrike (CRWD) will announce their results as well.
At an economic forum, Nvidia (NVDA) CEO Jensen Huang said that artificial general intelligence could – by some definitions – arrive in as little as five years.
Arkhouse Management Co. LP announced it submitted an increased all-cash proposal to acquire Macy's (M) for $24.00 per share along with its partner, Brigade Capital Management.
Super Micro Computer's (SMCI) shares will be added to the S&P 500 index as part of the latest quarterly rebalancing, effective March 18. The company will replace home appliance maker Whirlpool (WHR).
For more, be sure to read our Daily Markets column published each day by Nasdaq.
Model Musings
Artificial Intelligence
“Less than four years after that milestone, America’s use of AI in warfare is no longer theoretical. In the past several weeks, computer vision algorithms that form part of the US Department of Defense’s flagship AI effort, Project Maven, have located rocket launchers in Yemen and surface vessels in the Red Sea, and helped narrow targets for strikes in Iraq and Syria, according to Schuyler Moore, the chief technology officer of US Central Command. The US isn’t the only country making this leap: Israel’s military has said it’s using AI to make targeting recommendations in Gaza, and Ukraine is employing AI software in its effort to turn back Russia's invasion.” Read more here
“On Feb. 23, Bloomberg News reported that humanoid robot startup Figure AI raised about $675 million in a funding round, with Jeff Bezos, Nvidia Corp. and other investors valuing it at about $2 billion. The company has said it hopes its product will be able to perform tasks that are dangerous to humans or hard to hire for, including warehouse jobs. The Norwegian robotics startup 1X Technologies ASraised $100 million earlier this year. OpenAI, the maker of ChatGPT, is an investor in both companies.” Read more here
Guilty Pleasure
“Cocoa prices have climbed to record highs, and market participants don’t expect any near-term relief. Prices have skyrocketed as the world’s biggest producers in West Africa grapple with drought and disease as well as structural problems that could linger for years to come. Futures traded in New York averaged well below $3,500 a metric ton every year from the 1980s until 2023. On Feb. 22 cocoa futures surpassed $6,000 a ton for the first time, and the market worries they could still have further to run… Consumers are most likely to cut spending on chocolate and candy if inflation continues, behind only alcohol and makeup, according to a survey from September by consumer intelligence company NIQ.” Read more here
Nuclear Energy & Uranium
“Across the US and allied countries, owners of left-for-dead uranium mines are restarting operations to capitalize on rising demand for the nuclear fuel. At least five US producers are reviving mines in states including Wyoming, Texas, Arizona and Utah, where production flourished until governments soured on the radioactive element following the 2011 Fukushima nuclear disaster in Japan.” Read more here
“The US uranium enrichment industry would get a $2.7 billion infusion in a government funding bill unveiled Sunday, reflecting efforts to wean the nation off nuclear fuel imported from Russia. The funding, which was requested by the White House, is part of a broader plan by President Joe Biden’s administration to buy enriched uranium directly from domestic producers. The goal is to spur the return of nearly dormant US capabilities by creating a guaranteed buyer of American-made nuclear reactor fuel.” 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.