A combine notes because of time off an holidays

Big themes around the direction of the economy, the labor market and the Fed’s next move. As Keith Fitz Gerald notes: “Trying to anticipate the Fed is a fool’s errand.”

Inflation is close to target, but the Eurozone is clearly in the throes of deindustrialization. Regardless of monetary movements in other countries, US data and corporate results continue to surprise to the downside. Is something big coming, or is it simply a bump in the road?

Labor market headlines are often worse than reality. While we’ve reached a high point, since 2021, the rate is still historically low. The expansion is slowing but we aren’t seeing a crash like in 2008. On the flip side, startup layoffs are down 62% since January 2023 per Carta. It’s been steady since early 2022 and may be ending.

The rest of the economy is going through the cycle. Weak companies continue to seek acquisition, or bankruptcy. Financial companies might be in a weakened position but in the near term the 2008 regulations are doing their job.

The biggest headwinds for the economy are the commercial real estate market that has a 20.1% vacancy rate, not seen since the 80s. No indication of how or when this will impact real estate, finance or local governments. Another headwind is the increasing damage from cyberattacks, which impact company bottom lines. However, it’s also an opportunity for companies like Micrsoft to benefit from increased security spending.

TOPICS

• Global Recession
• Domestic Recession
• Fed Rate
• Commercial Real Estate
• Labor Market
• Bankruptcy
• Finance
• Mergers and Acquisitions
• Cybersecurity

I’m not sure why I note this every week, but the projected Fed rate cuts aren’t coming. By the Feds on definition, we have neither seen a decline in employment nor a decline in inflation. The latest PPI numbers support this. Yet somehow Wall Street is betting on rate cuts. At this point I’m just speculating on what type of tantrum the market will throw when reality is accepted. 

Environmental concerns continue to top business headlines and new Federal emission regulations have everyone banking on a future sales benefit from more strict emission requirements. But sales data shows that consumers don’t want EVs. EV manufacturer Fisker is halting production and could be on the verge of bankruptcy. Meanwhile climate alarmism is once again pointing to ‘chartbusting’ extremes due to a 1.5-degree Celsius temperature increase. Bottom line is that climate alarmism didn’t work, and future efforts need to focus on mitigation strategies. 

The world of semiconductors and machine learning continues to move at a brisk pace. Further investment in domestic semiconductors by the US will probably fuel an expansion and speculation similar to the solar industry under a similar Obama program. The trend around AI mergers and acquisitions continues with Apple acquiring DarwinAI and Microsoft scooping up Inflection AI. The overall trend is that Big Tech will be the big winners of AI.

TOPICS

• Inflation
• Labor Market
• Environment
• Climate Change
• Domestic Semiconductor
• Mergers and Acquisitions
• Cybersecurity
• AI and ML
• EV Battery Technology

Where is the stock market going? If the yield curve and consumer spending is an indicator we could be headed for a recession. On the other hand, Black Friday card data says that spending may not be as weak as expected and the VIX indicates a new kind of bullishness not seen in a while. On thing is clear, sectors that performed well outperformed the S&P 500 by a significant amount. 

Rent or buy? No not talking about a home, but rather machine learning cycles. Companies like Snowflake continue to grow amid high demand for Nvidia chips. Sometimes it makes sense to rent a server rather than rack your own hardware. 

A couple of bright spots. First battery prices are expected to fall and newer technology will improve performance. Likewise, life extending technology like CRISPR gene editing is opening new possibilities in treatment. Finally, even though modular nuclear technology is a non-starter at the moment, the broader application of “hot rocks making steam” is still a benefit to reducing carbon output.

TOPICS

• Consumer Credit
• Fed Rate
• Recession
• Battery Technology
• Cybersecurity
• Stock Market
• Life Extending Technology
• AI and ML
• Nuclear Power