Highmoon Capital Weekly: Milestones, Markets & Momentum
Welcome to this week’s newsletter, where we dive into the major events shaping the global and financial landscapes. From groundbreaking technological advancements and economic updates to earnings reports and geopolitical developments, this week has been packed with significant milestones. We’ll explore how Tesla’s stock rally impacts markets, analyze the latest inflation data, and highlight other key earnings and global events that are setting the stage for 2024. Let’s get started!
December CPI Report: Mixed Signals on Inflation
The December Producer Price Index (PPI) rose 0.4%, pushing the annual rate to 3.0%, up from 2.8% in November. Core PPI also increased, signaling persistent inflation pressures. Food prices surged 3.1%, with egg prices up over 50% due to avian flu, while medical and transport costs added to the rise. Stable energy prices offered some relief.
The report complicates the Federal Reserve's plans, hinting at entrenched inflation despite expected easing in the coming months as supply chains improve. These figures underscore the challenges of curbing inflation and will keep policymakers and investors cautious heading into 2024.
December PPI Report: Persistent Inflationary Pressures
The December PPI rose 0.4%, lifting the annual rate to 3.0%, up from November’s 2.8%. Core PPI also increased, driven by a 3.1% jump in food prices, including a 50% surge in egg prices due to avian flu, alongside higher medical and transportation costs. Stable energy prices provided some relief.
The report suggests inflation remains entrenched, potentially prompting the Fed to take a cautious approach to future rate cuts. Analysts expect inflationary pressures to ease as supply chains improve, but the data highlights ongoing challenges in controlling inflation and will keep policymakers vigilant into 2024.
Federal Reserve's Response
Despite these inflationary trends, the Federal Reserve is expected to implement a 0.25% interest rate cut in its upcoming meeting to support the cooling labor market. Market participants have largely priced in this move, with a 96.6% probability of the rate cut. However, the Fed may adopt a cautious approach to future rate adjustments, considering potential economic policies and trade tariffs.
The stock market responded positively to the inflation data, with the Nasdaq Composite surpassing the 20,000 mark for the first time, closing at 20,034.89. This surge was driven by expectations of the Fed's rate cut and significant investments in technology stocks linked to artificial intelligence.
These developments underscore the ongoing challenges in balancing economic growth with inflation control, as policymakers and investors navigate the evolving financial landscape.
Tom Lee’s Market Outlook: A Strong Finish to 2024 and Insights for 2025
Tom Lee of Fundstrat shared an optimistic view on markets, highlighting 2024's resilience despite challenges. He credits strong fundamentals and $7 trillion in sidelined cash for keeping stocks steady and expects a strong finish to the year as falling interest rates boost investor confidence.
Lee pointed to the rally in mega-cap stocks, especially in tech, as a sign of renewed "risk-on" sentiment. Lower rates and the potential for a Federal Reserve rate cut in December have fueled this momentum. He also sees progress on inflation, noting cooling trends in auto insurance and housing costs, which could help the Fed ease rates cautiously in 2025.
Lee introduced the idea of a “Trump Put,” referencing the anticipated administration’s market-friendly policies like deregulation, which could drive optimism and stock gains in early 2025. He predicts the S&P 500 could hit 7,000 by midyear, fueled by cash inflows and enthusiasm, but expects a pullback later, with a year-end target of 6,600. He advises investors to stay alert to risks like geopolitical tensions and trade tariffs that could weigh on the second half of the year.
Google’s Willow: A Quantum Computing Breakthrough
Google has unveiled Willow, a quantum computing chip capable of performing calculations in under five minutes that would take current supercomputers 10 septillion years. Achieved through real-time quantum error correction, this breakthrough was detailed in Nature, highlighting Willow’s performance and scalability.
Willow has immense potential, with applications in drug discovery, energy optimization, and AI. However, experts caution that practical use is years away, making it a milestone in an ongoing journey toward quantum technology. Alphabet Inc., Google’s parent company, saw a 12% stock surge following the announcement, though analysts warn that commercial applications remain in early stages. Willow underscores Google’s leadership in the field, signaling a promising future for quantum advancements.
Elon Musk Becomes the First Person to Reach $400 Billion Net Worth
Elon Musk, CEO of Tesla and SpaceX, has become the first person to surpass a $400 billion net worth, driven by Tesla’s stock hitting an all-time high of $424.77 on December 11, 2024. Factors include Tesla’s EV market dominance, strong China sales, and future innovations like robo-taxis and affordable models, along with SpaceX’s advancements in space exploration.
This milestone solidifies Musk as the world’s wealthiest individual and a symbol of innovation, highlighting the influence of technology and renewable energy in reshaping the global economy. While some critique wealth inequality, Musk’s success reflects the valuation of transformative industries.
In May 2022, Elon Musk revealed that Bill Gates held a significant short position against Tesla, initially estimated at $500 million. Due to Tesla's stock appreciation, closing this position would have required Gates to pay between $1.5 billion and $2 billion. Musk criticized Gates for this position, questioning his commitment to climate change initiatives while betting against an electric vehicle company.
BlackRock, the world's largest asset manager, has advised that investors consider allocating up to 2% of their portfolios to Bitcoin, recognizing its potential as a unique diversifier. This recommendation reflects a growing acceptance of digital assets in traditional finance.
In a recent report, BlackRock highlighted Bitcoin's distinct characteristics, noting its low correlation with traditional asset classes and its resilience during economic uncertainties. The firm emphasized that a modest allocation could enhance risk-adjusted returns without significantly increasing portfolio volatility.
Adobe Inc.: Adobe reported fiscal fourth-quarter earnings of $4.81 per share on revenue of $5.61 billion, surpassing Wall Street estimates. However, the company's revenue guidance for the first quarter and fiscal 2025 fell short of analysts' expectations, leading to a 10.1% drop in stock price to $494.50 in premarket trading.
Broadcom Inc.: The semiconductor company is scheduled to release its fiscal fourth-quarter earnings after the market closes today. Analysts expect earnings of $1.39 per share, marking a 25.2% year-over-year increase, on revenue of $14.1 billion, up 51.3% from the previous year.
GameStop Corp. (GME): In Q3 2024, GameStop reported earnings per share (EPS) of $0.06, surpassing analysts' expectations of a $0.03 loss. However, revenue declined by 20.2% year-over-year to $860.3 million, missing the anticipated $887.68 million. The company continues to face challenges in returning to profitability within its core business.
Oracle Corp.: Oracle reported its fiscal second-quarter earnings earlier this week, with results that met analysts' expectations. The company's cloud computing segment showed strong growth, contributing significantly to its overall performance.
Next week, several significant events are set to influence markets and industries. The Federal Reserve will hold its much-anticipated meeting on December 17–18, with expectations of a potential 25 basis point rate cut, depending on recent economic data. Key economic releases include November U.S. retail sales data on December 17 and the final estimate for Q3 GDP on December 19, which will offer insights into consumer spending and economic growth. Canada’s fall economic statement on December 16 will outline fiscal policies amid current challenges. On the corporate front, earnings from major companies like FedEx (December 17), Micron Technology (December 18), and Accenture (December 19) will provide updates on global trade, the tech sector, and corporate spending trends. Additionally, Nike’s earnings are expected to shed light on consumer demand and retail performance as the year-end approaches.
