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The Macro Situation
Economic equilibrium (noun):
- a state when supply and demand balance each other;
- a no-when;
- the point within an economy when the Heat Miser and the Snow Miser battle.
― New Entry in the Updated Devil’s Dictionary
Cool or feeling the heat? The moral of the story . . . always bet on the job market.
Promising signs that the number of job openings had dropped by 617,000 in November was outpaced by surprising unemployment data.
Economists anticipated the number of jobs added in November (199,000) given the end to the strikes in the auto and entertainment industries. However, the drop in the unemployment rate was a bit of a surprise. Economists were expecting the rate to hold steady from October (3.9%), but November’s rate fell to 3.7%.
Looking ahead to March’s Fed Meeting, when some economists think the first rate cut will start. We're currently at the 525-550 range. Here’s how the FedWatch poll stands:
Markets remain unperturbed, especially in view of the slower increase in wages, which sits at 4%, or 1% above the targeted annual rate for policymakers.
Accordingly, Gold (2018.40) declined in view of optimism about a soft landing. Good economic conditions mean less uncertainty and a diversion of liquidity to stocks.
Crude Oil (71.20) rebounded from its weekly low (68.87) with reports that the US will buy another 3B barrels to supply its Strategic Petroleum Reserve.
Long-term Treasury yields spiked when the Bank of Japan indicated it was ending its negative interest rates. Fiscal tightening introduces a level of uncertainty, as well as creating a stronger Yen against the US dollar (USD Index 103.99). This is not great for US treasuries given the amount of Yen that has been invested in US sovereign bonds (¥3.31T bought in September 2023).
- 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
Happy Trading!!
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 a 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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