What You Missed Yesterday

Monday, February 12

As Football Season comes to a close and earnings season starts to calm down—investors are desperate to understand how 2024 could play out as we head into a pivotal week.

Tomorrow’s CPI is going to be a major inflection point given how hot the market is running right now. Stocks like ARM have soared to truly white-hot valuations in the wake of strong performance and optimistic guidance. the AI boom can absolutely keep this growth going—but the Fed can easily ruin this party by delaying rate cuts.

Even with Jerome Powell’s more hawkish commentary last month, investors are still pricing in at least three rate cuts this year starting in Q2. With jobs data coming back fairly mixed for January—there is growing concern that we’ll have to stay in this holding pattern for rates until there is more of a structural slowdown. That could trip up this rally in an instant given how high some of the valuations are in areas where investors are piling into winning stocks.

Of course, a cooler inflationary environment could easily allow the Fed to drop rates early in the year and keep cutting as AI advancements become a truly deflationary force. That would be an even wilder transformation for our economy with massive implications.

For now—the market is in a bit of a holding pattern while analysts try to forecast what direction the wind is blowing. Earnings are solid enough while a few too many mid-tier players are posting more conservative guidance than expected. Is that conservatism justified, or are we setting up for a Q2 highlighted by the Revenge of the Russell 2000?

Tomorrow will tell us a lot more, but let’s explore the big headlines today powering those trends.

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