January 13 Market Recap

The weekend did little to help traders change their minds about Friday’s pullback as Technology, specifically Mag 7 names, weighed on markets. Utilities were the worst sector yesterday, as lawsuits are starting to be filed over the Los Angeles County fires. Of the Mag 7 names, Tesla (TSLA) bucked the trend as various “spirit animals” gave the company stock some life, pushing it 2.75% higher and helping it contribute to just over 85% of the Consumer Discretionary sector’s 0.75% result. Otherwise, broad equity indexes ended the day in positive territory, with the S&P 500 gaining 0.16%, the Russell 2000 rising 0.24% and the Dow closing 0.86% higher. Despite the day’s gains, all broad market indices remain in the red so far this year.

While $100,000 seems distant memory, Bitcoin (BTC) is still holding steady, trading around a $95,000 handle. Looking at other assets, gold is still trading at relatively elevated levels ($2,667/oz). Equity volatility as measured by the Cboe Market Volatility Index (VIX) ended the day a few points lower than it started but still trading above 19, well above historical norms.

Oil continues to rise as the outgoing administration continues to increase pressure on various backchannels used by Russia to evade sanctions with West Texas Intermediate (WTI) rising 2.64% to $78.59/bbl and Brent Crude (BRENT) gaining 1.15% to $80.68/bbl. Again, good news for Energy investors but not helpful for anyone looking for lower inflation.

The Tematica Model Suite saw some pressure in technology focused strategies but Economy 1.0 (i.e.: non-technology focused) strategies showed leadership, with Homebuilding & Materials, Rebuilding America, and Core Holdingsfilling the top slots on yesterday’s leaderboard. As we talked about in the latest Week Ahead video, markets are not fans of uncertainty, and given the strength of recent economic data, it’s becoming more clear we are in the middle of a Fed rate cute expectations reset with no clear outcome.


PPI, CPI & Bank Earnings with Retail Presentations Mixed In

Early morning equity futures point to a higher market open, however, readers and fellow investors will want to revisit those readings after 8:30 AM ET. That’s when the December Producer Price Index (PPI) will be delivered, and following indications collected from the December PMI report that prices accelerated in the final month of the year, the market expects to see the same in today’s PPI data.

The consensus for headline PPI is 3.4% YoY, up from 3.0% in November, but even if the December figure comes in slightly less than expected, it would still be enough to show a steady climb higher compared to 2.6% YoY in October and 2.0% in September. We see a slightly different picture with core PPI, which is also expected to climb compared to 3.8% YoY vs. 3.4% YoY in November, but there is little in the data that suggests a near-term drop back to the early 2024 lows are in the cards.

Should the December PPI figures come in as expected or a tad warmer, it will be more ammunition for the market to support the push out for the one Fed rate cut the market now sees occurring in 2025. If, however, today’s PPI data comes in hotter than expected, it could push that lone rate cut into 2026. If you’re not sitting on pins and needles yet, we will be going through this all over again tomorrow morning when the December Consumer Price Index (CPI) is reported.

In between these reports, we have a few Fed speakers making the rounds, and it’s hard to imagine, based on recent data, that they offer a different perspective other than the cautious path laid out by Fed Chair Powell in December. Today also brings another wave of retail company presentations at the 27th Annual ICR Conference.

That event will continue tomorrow, but it could be overshadowed by the start of big bank earnings, with quarterly results from JPMorgan Chase (JPM), Goldman Sachs (GS), and Citigroup (C). As we discussed in Monday’s The Week Ahead video, we’ll be interested in their comments on investment banking and asset management activity, but also how they see “higher for longer” interest rates impacting the economy and their business.


Model Signals

Artificial Intelligence

According to a new estimate by Skanda Amarnath, executive director of Employ America, spending on building up AI technologies made up between 16% and 20% of real gross domestic product growth in the third quarter of 2024 alone, and is only expected to grow. As a share of total spending outlays, AI-related investments are on track to surpass the share of GDP attributed to the late ’90s dot-com boom and become as large as housing was during the 2000s bubble… Read more here

A survey in the World Economic Forum’s (WEF) latest “Future of Jobs Report,” found that because of the “increasingcapability and prevalence” of AI, 41 percent of employers surveyed said they will shrink their workforce within the next five years if the technology is able to replicate the work. Read more here

Cybersecurity, Data Privacy

The U.S. Treasury Department said a state-sponsored Chinese hacking operation was able to access third-party software to tap into desktop computers of Treasury employees in what the department is calling “a major incident.” Read more here

Silk Typhoon Chinese state-backed hackers have reportedly breached a Treasury Department office that reviews foreign investments for national security risks. CNN reported on Friday, citing U.S. officials familiar with the matter, that the attackers gained access to the Committee on Foreign Investment in the United States (CFIUS) systems. Read more here

Over 4,000 abandoned but still active web backdoors were hijacked and their communication infrastructure sinkholed after researchers registered expired domains used for commanding them. Some of the live malware (web shells) was deployed on web servers of high-profile targets, including government and university systems, ready to execute commands from anyone who took control of the communication domains. Read more here

A huge data breach involving Gravy Analytics has appeared to expose precise location data for millions of users of popular smartphone apps like Candy Crush, Tinder, MyFitnessPal, and more. Here’s what you should know about the unfolding breach. Read more here

Digital Infrastructure

Global data center demand is expected to surge in 2025, despite supply and power constraints, according to a report from JLL. In 2025, an estimated 10GW is projected to break ground globally, with 7GW reaching completion. The global market will expand at a baseline of 15 percent CAGR through to 2027, potentially even reaching 20 percent. This comes despite the fact that rapid expansion is outstripping supply and that some markets have seen electricity development constraints. Read more here

Luxury Buying Boom

The world of luxury is expensive, rare, and highly sought-after, but it’s also undergoing a tumultuous shift. China and Europe will play less of a role in the global expansion of the luxury industry going forward, with the sector forecast to grow a paltry 1-3% between 2024 and 2027, new research suggests. Read more here

Guilty Pleasure

It’s the start of 2025, and that means many people are participating in Dry January. In 2022, 35% of legal-aged Americans skipped alcohol during the month, according to research firm CGA. But alcohol abstinence, or simply drinking less, isn’t a temporary adjustment for many consumers. Most data sources haven’t caught up with the changes in consumer attitudes over the past couple of years, but operators have seen a pretty dramatic decrease in how many of their guests drink and how much their drinking customers consume. Read more here

China produced 2.4tn cigarettes in 2023, with the number having risen in each of the previous five years and gained more than 35 per cent compared with 2003, according to figures from the National Bureau of Statistics. Figures from Euromonitor show that the country’s share of global sales rose to about 47 per cent last year from less than 38 per cent in 2009, echoing the findings of other studies tracking tobacco in China. Read more here

Safety and Security

Finland’s conservative-led government has unveiled a broad plan to lift defense spending from $6.8 billion in 2025 to $11.5 billion in 2032. The government’s proposal, which has gained the majority support of the main opposition parties in the Eduskunta, the parliament here, would reposition Finland’s annual spending on defense closer to 3.3% of GDP, placing it well above NATO’s 2% guideline. Read more here

For the U.S. Navy to achieve a proposed plan to expand its fleet of battle force ships, the service would need to spend $40.1 billion on shipbuilding every year through 2054, for a total of more than $1 trillion, according to new analysis from the Congressional Budget Office. Over the next 30 years, the Navy wants to grow its fleet of battle force ships to 381 to face swelling global threats, according to the service’s most recent proposal. There are currently 295 in the fleet… 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.
  • Cash Strapped Consumer – Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
  • 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.
  • 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.
  • Cybersecurity – Companies that focus on protecting against the penetration of digital networks and the theft, ransom, corruption or destruction of data.
  • Data Privacy & Digital Identity – Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
  • Digital Infrastructure & Connectivity –The buildout and upgrading of our Networks, Data Storage Facilities, and Equipment.
  • Digital Lifestyle – The companies behind our increasingly connected lives.
  • Digital Payments – This model focuses on companies benefitting from the accelerating structural adoption of digital payments and financial technology (FinTech).
  • 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.
  • 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.
  • 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 above.

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