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The Macro Situation
GDP (noun):
- “the standard measure of the value added created through the production of goods and services in a country during a certain period” (OECD);
- Gauge of Darwinian Pedigree.
― New Entry in the Updated Devil’s Dictionary
Survival of the fittest. It’s a misleading phrase.
It doesn’t mean that something is near-invincible, like some fine, buffed-out specimen on parade at muscle beach. At least as Darwin’s evolutionary theory is concerned, “fittest” refers to how well a species fits within its specific environment.
So, too, with GDP. Not all things economic benefit from a strong GDP. It depends on the macro environment.
For one, it can exacerbate attempts to curb inflation, especially if it drives an increase in wages. Recall that average hourly wages gained 0.4% in December 2023, which was a 4.1% rise year-on-year.
Enter Q4 stats: GDP rose 3.3%. That’s astounding given how many pundits had seen recession setting in by the end of 2023.
So, then, good news?
Maybe Not
- The Fed may just keep rates high for longer, especially if markets get euphoric over the economy’s resilience.
Maybe
- The Personal Consumption Expenditures (PCE) index, which is the Fed’s preferred measure of inflation, fell below 3% for the first time since March 2021.
- Jobless claims may help alleviate concerns if this week’s trend continues. Claims rose 25k from last week to reach 214,000.
The 10-year US Treasury yield (4.139%) dipped on the news of GDP growth, while the 10-2 year US Treasury spread (-0.19) – a key indicator of recession – has inched its closest to being positive since it inverted in July of 2022.
Gold (2018.20) has been feeling the might of the Herculean economy. The precious metal is down YTD while the US dollar index (103.47) inversely benefits from heightened expectations of a soft landing.
Crude Oil (78.23) jumped at the end of the week due to stubborn winter weather in the US.
- Todd Mei, PhD and Sebastian Purcell, PhD
AI Sentiment Report
The following sentiment scores use ChatGPT as part of the AI tech stack to track sectors as leading indicators. (Lesson 4 of The Art of The Bubble covers the selection of lead indicators for bubble trades). The scores are most indicative for the next day of trading (a Monday), but they appear to set the general tone for the next week.
The methodology employed is based on this peer reviewed academic article, which produced 550%+ results in back tests over a 2 year time frame. We consider 4 and 5 scores to be positive, but please bear in mind that the AI model is still in its validation phase.
-The Research Team:
Dom Viera, Samantha Russell, Nicole Zinuhova, Aiza Malik
Free Stuff!
We'll be contacting 10 Winners on Discord this week to receive holiday ETH, so pay attention to the Give Aways channel.
Happy Trading!!
-The Team
The 1.2 Labs Edge
Our paid plans make use of the same base algorithm that our hedge fund, 1.2 Capital Management does, but modified in timeframe so you don’t have to stare at your screen all day.
Below are two of our data service offerings for stocks. The Bubble Portfolio has never had a down year and the Leveraged Portfolio should be 3x the QQQ (so negative), but it’s outperforming by better than 12%.
This newsletter is provided for educational and entertainment purposes only and should not be relied upon for business, investment, taxation, or legal advice. You should consult your own advisors for those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by 1.2 Capital Management. (An offering to invest in a 1.2 Capital Management fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation--all of which should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by 1.2 Capital Management, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.
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