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The Macro Situation
Core Inflation (noun):
- the concerted use of exercises targeting the core of the body;
- an economic law expressing the tendency that when prices rise due to inflation, they never return to their previous levels.
― New Entry in the Updated Devil’s Dictionary
A US government shutdown has been avoided, the CPI has remained flat compared to October, the PPI has declined 0.5%, Q4 consumer spending has been much cooler than Q3, and there was a slight uptickin the unemployment rate last month. So what does it all mean?
There is significant belief the economy is cooling down and that once again a soft landing may be in view. The last time the Fed mentioned an economic correction without a significant recession (in Feb 2023), jobs data came in strong to quash any optimism. Next Thursday’s initial jobless claim data will go a long way in confirming or contradicting current macro sentiment. In the longer run, some economists believe that lower consumer confidence and spending is not the same as consumer financial resilience, which is arguably high and can therefore help prop up the economy during a slowdown.
A perfect balance might be in the offing between the “higher for longer” interest rates and the dropping 10-year treasury yield (4.439%). If that yield were to begin to rise, we would see much tighter market conditions – a sort of double whammy (high interest rates and high yields) on business investment and borrowing costs.
Crude oil (75.84) remained mostly down due to increased inventories and the fear of a lack of demand from consumers. Gold prices (1983.50) were propped up this week mainly by trading in the Chinese and Indian markets.
- 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
Happy Trading!!
Think About Paid
Our subscriber 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.
We have two primary data offerings in cryptocurrencies: (1) AOTB Dynamic and (2) the Crypto Maxi. Here are our returns with comparisons to others (data from Messari.io).
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