Federal Reserve - 3 cuts in 2024!
- Rates kept unchanged– Fed signals no rush to cut given recent data not going in that direction (slower disinflation, strong job creation)
- Fed’s projections for policy rates – December median dot confirmed, Fed’s policymakers foresee 3 rate cuts in 2024
- Data dependent Fed– Macroeconomic data during the next couple of months will be crucial for determining the starting point of the easing cycle
- Balance-sheet unwind – The Fed considers appropriate to slow the pace of the Quantitative Tightening to ensure a smooth transition
Central Bank Frenzy
- Bank of Japan– negative rates and YCC were abandoned, but still firmly dovish
- Bank of England– Rates expected to remain unchanged (5.25%). Statement should not include any hints on when the first move could take place
- Swiss National Bank– Policy rate unexpectedly lowered to 1.50%, from 1.75%, based on the successful fight against inflation over the past two and a half years. The Swiss National Bank forecasts inflation to remain within the target range in the next few years
China: No Strong Action in Sight
- Following a long standing tradition, China’s leaders disclosed the macroeconomic targets for 2024 during the National People Congress. The GDP growth target is kept at +5%, as the Inflation one (+3.0%). The Central Bank rules out dramatic actions
- As China’s growth potential is shrinking, the real estate crisis is going on and deflation looms, many observers took the official targets with skepticism
- Most of the efforts will involve fiscal policies. The central government plans only a 3.0% deficit, but the indebted local governments are pushed to massively issue bonds to finance infrastructure investments. The question is whether they will play the game
Japan: from NIRP to PIRP
- While many Central Banks fight inflation, in Japan the opposite happens
- The unions federation Rengo has so far secured an increase of 5.28% in annual wages
- This could boost consumers’ confidence…
- …and convinced the BOJ to raise its reference rate from -0.10% to +0.1%
- This marks the end of NIRP (Negative Interest Rate Policy) in place since January 2016
European earnings radar - update
- STOXX 600: 73% of the companies have published results (83% of the market cap)
- The earnings beat rate is only 44%, well below previous quarters (similar beat rates were reached only in Q1 2018)
- This is also well below the US, with a beat rate of 76%, which is partly the result of the positive IT sector effect (S&P500, 99% of market cap)
- There have been significant more rating downgrades related to results than upgrades by analysts and they continue to cut estimates for 2024 and 2025
- By sector, the main beats were in Information Technology, Financials, and Utilities, while, Communication Services, Real Estate, and Materials were the worst performers
Investment idea: Data Center meets AI
- AI growth drives data center growth
- US data center demand is forecast to grow by more than 10% pa by 2030
- Global spending in construction of data centers is forecast to reach 49bn USD by 2030
- Value chain with plenty of potential: construction, water consumption and electricity management
- Climate change, decarbonization of data centers, increasingly powerful computers, cooling and energy efficiency offer investment opportunities
208'000'000'00
- The number of transistors in the new Blackwell chip presented by NVIDIA
- The Enablers vs. the Adopters
- Apple and Alphabet: potential deal to power the iPhone with Google’s Gemini LLM
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