Waiting on Powell's DC Testimony
Waiting on Powell's DC Testimony
Odds are high the Fed Chair reiterates a slow path to rate cuts
US equity markets are looking to win back some of the declines over the last two days, but how the trading day fares will hinge on Fed Chair Powell’s comments as he begins two days of back-to-back testimony in Washington. Based on what we saw in yesterday’s February Service PMI reports -- continued strength in that part of the economy and selling prices continuing to rise -- and other recent data, the odds Fed Chair Powell will double down on a slow path to rate cuts are high. Powell's choice of words and tone, especially during the Q&A portion of the testimony, will be what the market focuses on the most. We highly doubt Powell will tip the Fed's hand, but the more forceful his remarks are about needing to stay the course until the fight on inflation is assured, the more likely we will see rate cut expectations slip further.
That could lead to yesterday’s market sell-off continuing today, but we will also have to see what this morning's ADP Employment Report says about job creation during February. Consensus expectations are for 150,000 jobs during the month, up from 107,000 in January. A stronger print would bolster the case for a slow-walking Fed while an inline print won't do much to change that expectation. We say that because a print near 150,000 jobs would be above the trailing six-month average of 125,000 jobs created, according to ADP's data.
When we read the data, we'll also look at the wage data it brings. In the January report the median annual pay increase for job stayers was 5.2% while for job changers it was 7.2%. Those figures have been inching lower over the last several months, but if that progress slows or those figures rebound higher, it would be another sign that rate cut timing is likely to be pushed off even further.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
Model Musings
Consumer Inflation Fighters
“Risk is the "new normal" for the global ocean shipping industry that handles 80% of global trade as pressure from geopolitical tensions, rising protectionism, and climate change mounts. "There are going to be global tensions ... and I think global dangers, at a level we haven't seen since the end of World War II," former U.S. Defense Secretary Robert Gates said at the opening of S&P Global's TPM24 container shipping conference in Long Beach, California, on Monday.” Read more here
Digital Infrastructure & Connectivity
“Telecom operators haven’t yet finished rolling out 5G wireless mobile networks. And yet bosses of major carriers are already talking about building something called “5.5G,” or “5G Advanced… “Main priorities for developing 5G Advanced standards are to increase commercial relevance of 5G by expanding vertical markets, resolve deployment issues, and continue technology evolution to build a bridge towards 6G… ” Read more here
Precision Ag & Agriscience
“Our system is capturing two million pixels per second, so it is seeing and processing a lot,’ says Ms Kovar, who is vice president of Production and Precision Agriculture Production Systems at John Deere. To help the software identify the weeds, there are more than 300,000 images on a John Deere database. The system currently works with three crops - corn, soybean, and cotton - and is so far only available in the US.” Read more here
EV Transition
“The '24 Charger Daytona lineup will only be offered with a two-door body style; a four-door version is coming next year (more on that later). The familiar R/T and Scat Pack trim levels carry over from the outgoing generation. Both will have dual electric motors that provide standard all-wheel drive. The R/T will debut with up to 496 horsepower and 404 pound-feet of torque, and the Scat Pack will arrive with up to 670 horses and 627 pound-feet.” 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.