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The Macro Situation
envelope (noun):
- a resealable flap designed for enclosing letters or documents;
- the limits of performance for some thing or entity;
- a kind way to say “bubble”.
― New Entry in the Updated Devil’s Dictionary
With over 60% of investors expecting a rate cut in March, price adjustments ensued after the Fed quashed such hopes following their Wednesday meeting.
However, the interest rate wet blanket couldn’t keep markets down for long. Cue the fanfare.
Tech earnings shone brightly. Companies like Meta, Amazon, Apple, and Super Micro reported significant earnings in Q1 of 2024. Even mortgage rates dropped for a second time since the start of the new year.
The US economy is strong. It added 353,000 jobs last month; unemployment remained steady at 3.7%; and wages increased 0.6%.
But is the US economy stable? Or, is it pushing the envelope? Two factors to keep in mind:
Have You Heard the Good News?
- Will the Fed follow its mantra that the “good news” about the strong economy is "good news” for interest rate cuts?
What’s Bubbling?
- How much are tech stocks bloating markets? When are markets due for a sharp correction?
Looking inside the envelope . . .
Gold (2057.10) is down due to the strength of the economy and the US dollar (103.96).
Crude Oil (72.41) prices remain relatively low despite logistical headaches in the Middle East, severe winter weather halting production, and news that OPEC will maintain output cuts.
10-year US Treasury yields were trending down (4.024%) but shot up with Friday’s jobs report as investors look for better returns in stocks.
- Todd Mei, 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!
Here are the seasonal winners announced on Discord. We're going to distribute the winnings on the Arbitrum L2 because fees.
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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