Actionable market insights delivered weekly
Categories
AI
Asset Allocation
Big Tech
Books
Bubbles
Charlie Munger
China
Commodities
Consumer Confidence
Consumer Spending
Credit
Cycles
Debt
Discounted Cash Flow
Earnings
Economic Cycles
Employment
Equity Risk Premium
ETFs
Fed Reserve
Finding Value
Forecasting
Generative AI
Geopolicitics
Gold
Geopolicitics
Lessons
Macro/Econ
Magnificent Seven
Geopolicitics
Monetary Policy
Money Supply
Nvidia
oil
Precious Metals
Property
Quantitative Easing
Rates & Bonds
Real GDP
Real PCE
Recession
Retail Sales
Risk
S&P500
Sahms Rule
Soft Landing
Stocks
Tariffs
Trade
Trump
US 10-Year Yield
Valuations
VIX
Warren Buffett
Yield Curve
Core PCE Softens – Giving the Fed Scope to Cut
If there’s one inflation indicator the Fed tracks more than any other – it’s Core PCE (personal consumption expenditures). The PCE price index looks at U.S. inflation by measuring changes in the cost of living for households. It tracks the prices of a basket of goods and services, each with different weightings, to reflect how much a typical household spends every month. Today we learned that Core PCE continues to soften – which is good news. Question is does this give the Fed further scope to cut rates sooner rather than later?
Lessons from 1999/2000
Momentum is a powerful force. Bet against it at your peril. John Maynard Keynes was believed to have said “…the market can remain irrational longer than you can remain solvent”. Sound advice. Those expecting (or worse betting) the market would reverse to start 2024 are probably questioning their decision. It’s been one record close after another. Higher highs beget higher highs.
Will Earnings Deliver on the Hype?
Q4 2023 earnings are starting to hit the tape. From mine, if the market is to continue rallying – it’s less about inflation and the Fed – it’s whether corporate America will deliver on 12% earnings growth in 2024. Coming into earning’s season – my view 12% felt ambitious – given the slowing economy and relative health of the consumer. This post talks more to the concentration in the market – the relative influence from NVDA – and why diversification will be key this year.
Equal Weight ETF to see Mean Reversion
The euphoria in markets continued last week – with the S&P 500 notching a new record high – taking out the 4817 high from Jan 2022. Thanks largely to the Fed signaling peak rates in combination with inflation trending lower – markets now believe a ‘soft landing’ is possible. That is, inflation ultimately trends back to the Fed’s objective (2.0%) without any negative impact to the broader economy (e.g. widespread job losses). We will see how that turns out – as the Fed is attempting to thread a narrow needle. From mine, a soft landing remains a lower probability outcome. However, I believe there is still opportunity… and it’s not with large cap tech stock.