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The Macro Situation

palindrome (noun):

• a word or phrase that reads the same backwards as it does forwards—such as, madam, radar, refer, and “do geese see god?”;
• the state of the economy when observers cannot tell which way it’s going.

― New Entry in the Updated Devil’s Dictionary

Investors are feeling the effects of this economic palindrome as they try to make sense of the latest economic data.

The good news: the economy is strong.

• The Q4 GDP was revised down 0.1% to 3.2%, but that’s still rather robust.
• ​The Conference Board is forecasting “the consumer spending growth to cool and for overall GDP growth to slow to under 1% in Q2 and Q3 2024,” thus moving away from recession territory.

The bad news: inflation is sticky.

• The Personal Consumption Expenditures index rose 0.4%.
• ​Consumer confidence fell 3.1% from January.

More good news:

• The yearly rate of inflation dropped from 2.6% to 2.4%.
• The rate of core inflation in January slowed to 2.8% from 2.9%.
• Personal income rose 1%, which was above the forecast for 0.3%.
• Initial jobless claims rang in at 215,000 for last week, which was up 13,000 (this is good because slightly higher joblessness implies no wage-based inflation spiral).

More bad news:

• According to Atlanta Fed President Raphael Bostic, the PCE is higher than one would hope. The general trend is down, but the road will be bumpy.

And then there is the AI sideshow: Yea or Nea.

• Debate still continues as to whether the AI-tech bubble will soon burst. When the likes of Dell (and its new focus on AI) closes with a 32% rise in shares as it did Friday, one wonders if AI stocks are overvalued due to FOMO.

The state of the economy is looking good according to the aNFCI. Anything below 0.0 indicates financial looseness, and historically a -.3 or lower has meant there is enough liquidity to support speculation in risk-on type assets. Conversely, anything above 0.0 indicates financial tightness and a risk-averse environment.

As of February 23, 2024, the ANFCI was -0.49 (on Feb 16, 2024, it was -0.51).

Core Assets Update

Gold (2091.60) investors took the good news about the economy as bad news for the first interest rate cut. Gold has risen to its highest YTD.

Crude Oil (79.81) prices rose on the expectation that OPEC+ will continue its production cuts into Q2.

10-year Treasury yields (4.186%) trended down, suggesting that investors still anticipate rate cuts this year (with the first starting in June).

- 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!

Join our Zealy campaign for a Kaze NFT whitelist: Invitation Link

If that doesn’t work, here’s the address to copy and paste: https://zealy.io/cw/12labs/invite/_yjLGUZ_0U1J-VU_3XUBR​

I think we’re also obligated to launch a meme coin at some point.

Happy Trading!!

-The Team

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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 (image updated quarterly).

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