Inflation, Interest Rates, and Investment Opportunities
Dear Traders,
Happy CPI Day!
Over the last two years, the Consumer Price Index (CPI), or simply inflation, has caused more market volatility than anything else. The high-interest-rate period and financial tightening we’re seeing from the US Central Bank aim to control this inflation. The January figures, released at 8:30 a.m. New York time, were expected to show disinflation spreading from goods to services.
But that did not happen.
The CPI increased 0.3% last month after gaining 0.2% in December. There are various ways to read inflation, including and excluding goods and services, shelter, energy, and food, to name a few!
What people experience day-to-day may not necessarily align with what the Bureau of Labor Statistics reports. But, the number the US Central Bank focuses on is “the core CPI”, currently around 3.6%, far from their 2% target.
The previous slowdown in price pressures had built expectations for rate cuts this year, though Fed officials have consistently refused this idea. They emphasize that they do not plan to cut rates until inflation is meaningfully under control.
The market did not like the readings and started a sell-off. The S&P 500 is up over 4% so far in 2024, even with today’s market sell-off. That’s quite impressive, considering we’re not even halfway through February yet. However, this strength in SPY is concentrated in only one sector.
Yes, you guessed it right: AI and semiconductors.
One company capturing significant attention is chip company Arm Holdings (ARM). Just last week, its market cap was below $75 billion. As of yesterday, it’s above $150 billion—doubling its worth in a short time is pretty impressive for such a big and well-established company. In the past month, its value has gone up by more than 75%.
One trader from Peak Capital made over $10,000 on it in a single day, taking that profit from bootcamp! Good for him!
Super Micro Computer (SMCI), another company riding the AI wave, was around a $15 billion company at the start of the year. Today, it’s close to $45 billion. In the last 30 days, it is up over 142%.
And of course, you’ve probably seen plenty of NVDA and AMD charts, so I won’t bother to post that here. I’ll just note that at one point yesterday, NVDA briefly had a larger market cap than Amazon.
Cloudflare (NET), is another company that spiked over 20% after posting strong earnings and capturing AI enthusiasm.
AMD and NVDA are so strong these days that even today, while Nasdaq QQQ was down over 2%, they barely traded in the red. Brian and I traded AMD for a massive $10 move today to the long side!
Watch my recap to see how, in a very weak market, Brian and I traded AMD and PLTR successfully.
Meanwhile, outside of the AI realm, crypto has been on a tear over the last week or so, with Bitcoin gaining 16% in 7 days, surpassing previous post-ETF highs.
Zooming out a bit, if you look at what’s happening in the market right now, we understand why this is not an environment where the Fed is inclined to cut rates. While tracking a handful of stocks isn’t part of the Fed’s official duties, the flow of money into certain areas such as cryptos, unprofitable SPACs, NFTs, and other speculative assets shows that the financial conditions are not tight enough.
Some economists, like those at Citigroup, are warning that the next Fed move might actually be a hike. I’m skeptical of that, but it’s an interesting notion gaining traction.
Tonight, one of our skilled traders, Thor, who has created a series of important webinars on VPA and pivot points, will present on Market Auction Theory.
In his webinar, Thor will explore the psychological factors influencing various markets, including the stock market, highlighting how understanding supply and demand can help identify emotions like fear and greed. This knowledge is crucial for making informed decisions on buying, selling, or being cautious.
I hope you join his webinar tonight at 8 pm ET, and attend the Vancouver live trading workshop with him. We’re almost sold out for Vancouver, with less than 20 tickets left. With 53 days to the event, I’m confident it will sell out.
If you’re considering joining, act now. We’re booking the entire venue at Paradox Hotel in Vancouver (a luxury hotel in one of the best neighborhoods, previously Trump Tower), and the area has no more ballrooms. We must close registration if we reach 250 attendees, so please sign up early if possible.
Join Us In Vancouver
I’m excited to see so many of our traders, guests, moderators, and some of the most successful Peak Capital traders in Vancouver and their partners for two days of fun, learning, and community building.
To your success,
Andrew
