Will the January CPI Support a Slow Walking Fed?
February 13, 2024
US equity futures are pointing to a lower open. At 8:30 AM ET, the January Consumer Price Index (CPI) will be published, and the market consensus sees the headline figure falling to 2.9% YoY from 3.4% in December, and the core January figure easing to 3.7% YoY from 3.9% in the prior month. Comments contained in the January PMI data from ISM and S&P Global (SPGI), and the January rebound in oil prices suggest we could see those CPI figures come in higher. Should that be the outcome, they would be the latest figures supporting the Fed taking a more measured approach to beginning a rate-cutting cycle.
Heading into this morning’s report, while the CME FedWatch Tool shows very low prospects for a March rate cut, it continues to reflect the market’s anticipation for 5 rate cuts this year. As the market digests the data found in the January CPI report, it will no doubt turn to comments from Chicago Fed President Austan Goolsbee at 9:30 AM ET this morning and Fed Vice Chair for Supervision Michael Barr at 4 PM ET. It would take a meaningful decline in the core CPI figure on a year-over-year basis for them to soften their stance compared to the Fed’s current playbook. The odds of that happening are not only low, but the likelihood of Goolsbee and Barr breaking from the pack without caucusing with them is even lower.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
Model Musings
EV Transition
“While there are some serious challenges surrounding EVs—such as the need to build out the nation’s charging infrastructure—automakers are on track to continue on a path of substantial growth. Leading forecasters agree that sales and market share will continue to grow in 2024. But they disagree on the rate of growth, and give different weights to some of the main factors that affect the market, from gasoline prices to the availability of low-cost models.” Read more here
“According to a new report published by Allied Market Research, titled, “Residential EV Charging Station Market," The market was valued at $5.4 billion in 2022, and is estimated to reach $101 billion by 2032, growing at a CAGR of 36.1% from 2023 to 2032.” Read more here
Nuclear Energy & Uranium
“Boris Schucht, chief executive of Urenco, said a US bill proposing to ban uranium imports from Russia would boost a multibillion-dollar effort by western nations to strengthen their nuclear supply chains by providing long-term certainty to market participants… Russia controls almost 50 per cent of global uranium enrichment capacity, a dominant position that has raised energy security concerns in the west following Moscow’s full-scale invasion of Ukraine. The US and crucial allies are now trying to rebuild their nuclear fuel supply chains, which were compromised by a collapse in demand after the Fukushima accident in 2011 caused a leak of radioactive materials.” Read more here
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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.