Up Next: January PPI and Fed Head Comments
Models at the halfway mark for 1Q 2024
Two things before we get going today.
We will not be publishing on Monday due to the President’s Day holiday but will see you bright and early on Tuesday the 20th.
Because we are halfway through the current quarter, we’re starting today’s missive a little differently:
And now that we have your attention, back to our regular programming…
Before the January Producer Price Index (PPI) is released at 8:30 AM ET, Atlanta Fed President Raphael Bostic will speak at 8 AM ET. Per his prepared comments, Bostic will say he is not yet comfortable that inflation is inexorably declining to the Fed’s 2% objective. We can see why he would say that following this week’s January Consumer Price Index (CPI) report that showed core inflation flatlining between 3.9%-4.0% over the last several months. The market is looking for the January PPI report to show that headline wholesale inflation fell to 0.6% YoY from 1.0% in December and core PPI slipped to 1.6% in January compared to 1.8% the month before.
However, similar factors that led to the upside surprise in the January CPI could very well rear their head in today’s PPI figures. If so, it would be yet another data point pushing back on rate cut timing by the Fed. Should the January PPI mimic the surprise in the CPI data earlier this week, we think the market will be very interested in what new comments Fed Vice Chair for Supervision Michael Barr (9:10 AM ET) and San Francisco Fed President Mary Daly (12:10 PM ET) have about rate cut timing. Our view has been 2-3 rate cuts starting in mid-2024, but as more data is published we will continue to revisit that thinking.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
Model Musings
Artificial Intelligence
Microsoft reportedly aims to invest $3.4 billion in Germany’s artificial intelligence infrastructure. President Brad Smith announced the plans Thursday (Feb.15) during a news conference in Berlin with German Chancellor Olaf Scholz, Bloomberg reported… He added that this will mark the tech giant’s largest direct investment into Germany and will be used to construct new data centers in North Rhine-Westphalia and around Frankfurt, as well as train workers, the report said. Microsoft is focused on cloud infrastructure and data centers in its bid to become an AI powerhouse through its work with OpenAI.” Read more here
“In a report describing new AI coding and testing features coming to Xcode later this year, Bloomberg also shares some interesting details about ways Apple is considering using AI to supercharge Spotlight. The report describes a version of Spotlight that is far more powerful than what we have today, thanks to the use of generative AI. Spotlight Search is Apple’s search utility that’s available on iPhone, iPad, and Mac. In addition to letting users find documents and files saved on their devices, it can also search the web, the App Store, and perform other rudimentary tasks.” Read more here
CHIPs Act
“Applied Materials Inc., the largest US maker of chipmaking machinery, jumped in late trading after giving a bullish revenue forecast for the current period, signaling that some of the largest semiconductor companies are increasing their investments in new production… The outlook suggests that the chip industry is bouncing back more quickly than expected. Applied Materials supplies gear to all of the sector’s major manufacturers — a list that includes Samsung Electronics Co., Taiwan Semiconductor Manufacturing Co. and Intel Corp. That makes the company’s projections an indicator of confidence in future demand at these key parts of the electronics supply chain.” Read more here
Digital Infrastructure & Connectivity
“Citing a recent real estate filing, BizJournal reports Microsoft purchased nearly 300 acres of land from the energy firm for $17.7 million. The seller was identified as United Power and Land Co., a company affiliated with Xcel, in a deal that closed on February 12. Xcel has confirmed the sale and Microsoft’s plans for a data center, but further details about the scope of the project weren’t shared.” Read more here
“US operator AT&T and the First Responder Network Authority (FirstNet) have announced a ten-year, $8 billion investment to expand and upgrade the nationwide public safety network. FirstNet will invest $6.3 billion through its network contract with AT&T and "anticipates an additional $2 billion" for ongoing investments in coverage enhancements for public safety. According to AT&T, the next phase of FirstNet will include the addition of 1,000 purpose-built FirstNet cell sites within the next two years.” Read more here
“A crypto data center provider says it is planning to spend $100 million building a 200MW facility in the US state of Oklahoma. Polaris Technology is constructing the Bitcoin mining facility on a 42-acre site at the John T. Griffin Industrial Park, Port Muskogee, south of Tulsa.” Read more here
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.
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.