Today Brings a Fav Fed Metric But...
Here's why the upcoming February PMI data will be more insightful
US equity futures are pointing to a lower open as Wall Street gets ready for the latest reading for one of the Fed’s favored inflation metrics.
When the January Personal Income & Spending report is published at 8:30 AM, market watchers will be more interested in the core PCE Price Index reading for the month and how it compares to the 2.9% reading for December. Setting the stage for this metric, the preponderance of January inflation data that has come in ahead of market forecasts suggests the Fed’s concern over the progress on inflation stalling was a valid one. That recent string of data suggests we could see little movement in the January core-PCE figure. A higher-than-expected result could throw some cold water on the year-to-date market rally.
However, in our view, it will be tomorrow’s February Manufacturing PMI and next week’s February Services PMI that will provide greater insights on inflation compared to another piece of January data. That same February data will also reveal the pace of the economy as we enter the last month of the March quarter. Our thinking is that so long as that data confirms an economy growing above trend, it will give the market reason to shrug off sticky inflation data points and provide the rationale for another push on expectations for the start of the Fed’s next rate-cutting cycle.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
Model Musings
CHIPs Act
“Advanced semiconductor companies have requested more than double the amount of available federal funds for projects in the US, Commerce Secretary Gina Raimondo said, referring to a program designed to bring chip manufacturing back to American soil. Leading-edge firms — which include Intel, Taiwan Semiconductor Manufacturing, and Samsung Electronics — are seeking more than $70 billion from the 2022 Chips Act…” Read more here
“U.S. chipmakers Intel and Micron are likely to win the largest share of the $52 billion in CHIPS Act awards this year, analysts told EE Times. With the U.S. 2024 presidential election approaching, the awards will help President Joe Biden show that he’s creating jobs and returning semiconductor manufacturing to the nation following a long history of offshoring, the analysts said. Asian chipmakers Taiwan Semiconductor Manufacturing and Samsung, also among the top-four companies that have sought CHIPS subsidies, are lower on the priority list because the U.S. government wants to avoid the perception of subsidizing foreign companies, according to the analysts.” Read more here
“The Biden administration laid out an ambitious new goal for the US: produce 20% of the world’s most advanced semiconductor chips by the end of the decade. Achieving that mark — set by Commerce Secretary Gina Raimondo in a speech Monday morning — would be a dramatic turnabout for the US. It currently makes 0% of the so-called leading edge logic chips that are considerably more powerful than older-generation semiconductors, making them crucial for everything from mobile phones to AI to quantum computing.” Read more here
Data Privacy & Digital Identity
“U.S. President Joe Biden has signed an executive order that aims to ban the bulk sale and transfer of Americans' private data to "countries of concern" such as China, Russia, Iran, North Korea, Cuba, and Venezuela.” Read more here
“In a statement published on their dark web leak site today, BlackCat said that they allegedly stole 6TB of data from Change Healthcare's network belonging to "thousands of healthcare providers, insurance providers, pharmacies, etc… Per BlackCat's claims, the sensitive data stolen from Change Healthcare contains a wide range of information on millions of people, including their:
medical records
insurance records
dental records
payments information
claims information
patients' PII data (i.e., phone numbers, addresses, social security numbers, email addresses, and more)
active U.S. military/navy personnel PII data"
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.