This Week's Signals
February 10, 2024
Aging of the Population
“More Americans are turning 65 this year than any prior time in history. Today’s 65-year-olds are redefining a milestone long associated with retirement parties and the end of productive years. They are wealthier and by many measures, healthier, and expected to live another 20 years. A growing share are divorced. Many turn their focus to what they want in this next stage.“ Read more here
Artificial Intelligence
“Colossyan taps AI to generate workplace learning videos, remixing, re-animating and editing footage of one of several virtual avatars against changeable backdrops. Users can enter a script to have it “read” aloud by Colossyan’s text-to-speech (TTS) engine, which also translates the script into over 70 languages.” Read more here
“There’s a group of people who could have told you that 2023 was going to be the year of Barbie pink before anyone else. And those “quiet luxury” fashions everyone was clamoring for with the end of Succession? They saw it coming from a mile away. These are the trend forecasters, people whose job is to distill the public’s mood and identify demand before the rest of us even know what we’re going to want. They hold their secrets close to the vest and for a hefty fee share insights into the future with their clients. The more accurately retailers and brands call trends, the more money they’ll make—and in the US, retail is already a $540 billion a year industry. It’s a tricky endeavor, and technology such as artificial intelligence and social media is changing how forecasting behemoths like NellyRodi and WGSN do their business.” Read more here
“Google is jumping into the tech industry’s latest craze: subscription chatbots. The search giant will begin charging $19.99 a month for its most powerful chatbot, Gemini Advanced, as part of a subscription plan that also grants access to extra file storage and other perks. Gemini Advanced is the latest update to the chatbot Google released a few months after the sudden rise of OpenAI’s ChatGPT… “ Read more here
Cloud Computing
“For the last several quarters we’ve seen a lull in the expansion of the cloud infrastructure market, with lower growth numbers than we’ve been accustomed to seeing in the past. That changed this quarter thanks in large part to interest in generative AI. The new revenue wave began just last year, driven by the ChatGPT hype cycle, but has already pushed cloud infra revenue in the fourth quarter of 2023 to $74 billion, up $12 billion over last year at this time and $5.6 billion over Q3, the largest quarter-over-quarter increase the cloud market has experienced, per Synergy Research.” Read more here
“Cloud is flexible. Because of this core reality, a second truism also comes to light i.e. there is no R in cloud, except there is. Because the cloud computing model of Software-as-a-Service (SaaS) based applications and data services is so inherently movable, malleable and manageable, we are offered an array of re-this and re-that options that give us the chance to reap the maximum business benefit possible (and environmental benefit too, we hope) from the use of cloud computing deployments. But how many of these R-factor processes are there, how important are they and what do we need to know about them?” Read more here
Data Privacy & Digital Identity
“A New York Senate panel on Tuesday advanced legislation (S365B) that would impose rules on how businesses collect, buy, and sell consumer data, joining a rush of other states passing similar measures. The Senate Consumer Protection Committee approved the bill, the New York Privacy Act, and referred it to another committee, which is also expected to pass the bill and send it to the full chamber.” Read more here
“Following months of arduous debate, Maine lawmakers are nearing agreement on a proposal opposed by Big Tech and retail giants like L.L. Bean that would give Maine the strongest data privacy protections in the country… California passed a comprehensive consumer data privacy law in 2018, with 13 states since enacting varying legislation that followed models initially drafted by industry giants such as Amazon, per the Electronic Privacy Information Center and U.S. PIRG Education Fund.” Read more here
Digital Infrastructure & Connectivity
“Meta is upping its capital expenditure (CapEx) for the year ahead, and now expects to pump between $30-$37bn into infrastructure projects in the next 12 months, a $2bn increase on the high end of the previously expected range. The company’s CFO Susan Li said in a statement to shareholders that continued investment in the hardware needed to train and run artificial intelligence systems would necessitate an increase in spending.” Read more here
EV Transition
“China has said it will strengthen support for the country’s electrified vehicle industry as the sector increasingly faces trade restrictions from the European Union and the US. The ministries of commerce, foreign affairs, and customs as well as four other government agencies on Wednesday called EV exports a “key pillar” in optimizing China’s foreign trade.” Read more here
Guilty Pleasures
“Ultra-processed snacks and meals are highly profitable. Major packaged food companies including Kraft Heinz, General Mills and Nestlé made an average operating margin of 17% over the past five years, according to FactSet data. Sellers of basic foodstuffs, like meat giants Tyson Foods and Pilgrim’s Pride, averaged 6% over the same period. Packaged foods with trademarked recipes and branding give companies more power to raise prices than foods that haven’t been tinkered with, such as fresh produce or meat.” Read more here
“The chocolate industry is running more bitter than sweet as cocoa supplies tighten and prices soar, affecting both manufacturers of chocolate confectioneries and consumer pocketbooks. Cocoa prices have jumped nearly 15% since the start of November and are approximately 65% higher than they were a year ago, according to a new research brief recently released by CoBank’s Knowledge Exchange. New York cocoa bean futures prices have consistently broached 46-year highs since September, and London ICE cocoa futures reached record highs in multiple consecutive sessions. These price surges in cocoa have trickled down to the retail level. Data from the US Department of Agriculture indicates the price of sweets overall is rising almost three times faster than the rate of broader inflation.” Read more here
“According to new research from CoBank’s Knowledge Exchange, U.S. consumers are paying more for chocolate products as confection manufacturers raise prices in response to the soaring cost of cocoa. Cocoa prices are nearly 65% higher than they were one year ago, and New York futures prices are at a 46-year high. While consumer demand has remained relatively strong, higher retail prices are poised to take a bigger toll on volume sales and stifle category growth through much of 2024.” Read more here
Luxury Buying Boom
“Coty beat Wall Street estimates for second-quarter revenue on Wednesday, powered by higher pricing and strong demand for its high-end Burberry and Gucci fragrances and fresh launches of cosmetics in the US during the holiday season. The company’s newer products such as Burberry Goddess and CoverGirl Clean Fresh Yummy Gloss helped pull in customers in the US compared to bigger rival Estée Lauder, which flagged feeble demand in the country and is doubling down on new launches and reinventing existing products.” Read more here
“…about 27% of Americans admit to “doom spending” to cope with concerns about the economy and foreign affairs, according to Credit Karma, a personal finance company. And the rates are even higher among Millennials and Gen Z, at 43% and 35% respectively.” Read more here
Precision Ag & AgriScience
“The federal government could help spur the adoption of precision agriculture practices in a number of ways, including increased research funding and assistance to farmers for enhancing data analysis, the Government Accountability Office says… Precision ag technology ranges widely from remote sensing platforms on drones and robots to in-ground sensors that monitor soil temperature and moisture, and targeted sprayer systems and automated weeders.“ Read more here
Space Economy
“Chinese automaker Geely Holding Group said on Saturday it has launched 11 low-earth orbit satellites, its second dispatch, as it expands its capacity to provide more accurate navigation for autonomous vehicles.” Read more here
“Intuitive Machines is ready to go to the moon. The company announced Monday that its first lunar lander has completed all final integration milestones and is now encapsulated in SpaceX’s Falcon 9 payload fairing, where it will stay until launch on February 14.” 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 expansions.
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.
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.
Nice work Tematica team!