CPI data comes in below estimates … relief from the soaring 10-year Treasury yield … Trump’s coming “energy dominance” … how Eric Fry is playing AGI
This morning, we received the second and more important inflation report of the week – the Consumer Price Index (CPI). Fortunately, the numbers came in soft, triggering two reactions.
The 10-year Treasury yield is plummeting, and the stock market is surging.
Beginning with the CPI details, the monthly headline number climbed a seasonally adjusted 0.4% in December, while the year-over-year number came in at 2.9%. Economists had been expecting readings of 0.3% and 2.9%, respectively.
Year-over-year core CPI, which removes volatile food and energy prices, clocked in at 3.2% with a monthly reading of 0.2%. This was lower than the respective forecasts of 3.3% and 0.3%.
A large driver of inflation was energy prices, which accounted for roughly 40% of the CPI’s gain. Shelter prices, which make up about one-third of the CPI, rose 0.3% (monthly) and 4.6% (yearly). That’s the smallest one-year gain since January of 2022.
Stepping back, this reading isn’t likely to result in more or faster rate cuts from the Fed, but it is relieving enormous inflation-related anxiety that’s weighed on the market for the last month. And that has Wall Street cheering.
As I write at lunchtime, all three major indexes are up big. The Nasdaq leads the way, nearly 2% higher.
Our hypergrowth expert Luke Lango predicted this. Here’s what he wrote last Friday in his Innovation Investor Daily Notes:
Yields are overextended. They’ll pullback.
[This] week’s inflation reports should be the catalyst which ends this surge higher in yields.
Then, stocks can resume their rally.
Zeroing in on the rates Luke referenced, the 10-year Treasury yield is crashing today
As I write, it’s down 12 basis points, lowering the 10-year yield to 4.66%.
This is huge. As we’ve highlighted here in the Digest, the bond market is driving market performance these days. So, with the 10-year yield pulling back sharply, Wall Street has the greenlight to cannonball back into “risk on” mode.
Plus, bullish investors have the added tailwind of this rally beginning at a key technical level.
As we detailed in yesterday’s Digest, coming into this morning’s CPI report, the S&P was sitting directly on its 100-day moving average. Because many quantitative trading algorithms are programmed to buy or sell based on whether the market breaks above or below such key technical levels, the fact that we’re rallying above the 100-day MA is likely to draw some additional professional/institutional buying pressure.
As we noted yesterday, today’s positive news combined with the rally off the 100-day MA leaves us looking for gains of roughly 4% to 6% over the next few weeks.
Of course, how Q4 earnings come in could affect that outlook, but assuming the reports are mostly positive, we expect the bulls will regain their swagger at least in the near-term.
Switching gears, is your portfolio ready for “Energy Dominance” under Trump?
This Monday brings president-elect Trump’s inauguration, which means get ready for an explosion of U.S. energy production.
From The Wall Street Journal yesterday:
[President-elect] Trump rode back to the White House with a pro-oil message that he termed “energy dominance” …
[He] is preparing a raft of executive orders aimed at boosting American fossil fuels and undoing his predecessor’s push for the U.S. to adopt electric vehicles.
Following his inauguration next Monday, Trump is expected to instruct agencies to begin unwinding President Biden’s limits on drilling offshore and on federal land, oil lobbyists said…
“The American people can bank on President Trump using his executive power on day one to deliver on the promises he made to them on the campaign trail,” said Trump spokeswoman Karoline Leavitt. “When he takes office, President Trump will make America energy dominant again.”
Legendary investor Louis Navellier has been eyeing this opportunity for months
Here’s what he wrote over the weekend about this Trump “energy dominance” opportunity:
With Trump as President, the existing ban on federal lands is expected to be lifted by an executive order on his first day back in office.
The Biden administration’s attempt to squelch liquefied natural gas (LNG) expansion will be over.
As we noted in the Digest last week, Louis has been zeroing in on natural gas and how it will power the explosion of AI datacenters we’ll see this decade.
Louis’ quantitative market approach and its ability to identify fundamental strength has gotten him into this opportunity ahead of most investors.
For example, Louis’ Growth Investor subscribers bought Targa Resources Corporation (TRGP) back in 2022 and are now sitting on 179% gains. Targa still commands an “A” rating in Louis’ Stock Grader. As Trump takes office and changes the fossil fuel landscape, Louis will be looking to add similar energy leaders to his portfolio.
But Trump’s impact on the economy and investment markets is creating opportunities that extend well beyond fossil fuels. Back to Louis:
Trump 2.0 will slash regulations and dismantle roadblocks to development on an unprecedented scale.
Once that happens, expect to see a massive buildout of data centers, electrical infrastructure, nuclear facilities, natural gas plants and whatever else Big Tech needs to fast-track the AI Boom…
And investors who stay focused on fundamentals – like accelerating earnings and sales growth – and don’t get distracted or react to every headline, will prosper.
To help investors accurately diagnose the fundamental strength of their own portfolios, Louis created his Stock Grader tool.
Think of it as a diagnostic that gives you an instant snapshot of a stock’s financial strength. It focuses on the same eight metrics that drive Louis’ stock selection process for all his premium investment services.
You can plug your portfolio holdings into the Grader and instantly discover how they measure up according to the criteria that Louis finds most important when it comes to high-performing stocks. Click here to learn more.
If you’d rather jump to the bottom line to find out which stocks made the cut in Louis’ system, and from there, the small handful he’s buying for Trump 2.0, Louis has just put together a new presentation with more information:
My system gave a buy rating to all of the top 30 performing stocks of Trump’s first term. And I’ve identified a handful of picks that I expect to prosper during this 100-Day Melt-Up.
You can learn more about these picks right here.
Shifting to AI, our macro expert Eric Fry just flagged three top-tier stocks to keep an eye on
In his flagship newsletter Investment Report, Eric has been monitoring the “Road to AGI” for many months now. And here too, the investment opportunities are growing.
If you’re new to the Digest, “AGI” refers to “artificial general intelligence.” This is the line-in-the-sand when AI becomes capable of “generalized” cognitive abilities, allowing it to achieve superhuman cognition.
In September, Eric began the clock on his “1,000 Days to AGI” countdown. He’s been eying which stocks are best positioned to capitalize on the transformative technology. And two days ago, he flagged three related plays for his readers.
While Louis is focusing on the natural gas that will be needed to power AI datacenters, Eric’s picks focus on the companies enabling the datacenters.
From Eric:
Data centers provide the essential foundations that enable AI technologies to function and progress toward AGI.
Therefore, companies that supply or enable various facets of data center infrastructure could enjoy years of boomtime conditions.
The three companies Eric flags are:
- Quanta Services Inc (PWR)
- Vertiv Holdings (VRT) (Full disclosure: I own VRT in my personal account)
- Powell Industries (POWL)
For brevity, below, I’ll annotate parts of what Eric has written about each play:
Quanta Services Inc. is one of the world’s leading specialty contractors in the utility, telecom, and power business…
Researchers at Goldman Sachs predict data centers will consume as much as 8% of U.S. electricity by 2030, up from 3% today. Quanta could profit handsomely from this demand trend by helping electric utilities overhaul and expand their aging electric plants, substations, and transmission infrastructure…
Vertiv Holdings Co. is a leading provider of power and thermal management solutions for data centers… [It] offers the entire suite of critical digital infrastructure technologies required to build and run data centers…
Powell Industries Inc. is a comprehensive provider of products and solutions for the electric power industry…
AI energy demands have become so intense that even upstream suppliers are having trouble fulfilling demand. These supply-chain kinks have created a tailwind for construction companies like Powell Industries, which have both inventories on hand and long-term agreements with suppliers for increasingly hard-to-find equipment.
While these are great companies, don’t overlook their valuations
A moment ago, I wrote that these are three plays to “keep an eye on” rather than “buy immediately.” I made that distinction based on Eric’s assessment of their valuations.
Though Eric likes each of these companies and believes they will thrive during this data center boom, their valuations already reflect lots of good news and hopeful expectations. So, put these stocks on your watch list, but wait for a pullback.
That said, I will point out that POWL is down 30% from its November high and is now trading at the same level as early-October.
Due to valuation concerns, while Eric likes these stocks, he’s been buying the “next wave” of potential AGI-leaders with valuations that don’t yet reflect their growth potential:
These companies, as a group, are well positioned to benefit from the data center boom that will facilitate the race toward AGI.
To learn more about the specific stocks that Eric has recommended to his Investment Report subscribers, click here to learn about joining them.
Wrapping up…
The second big inflation report of the week is out and it’s driving a fresh wave of buying pressure…
Trump 2.0 is just days away, so if you’re not positioned for it, start making your moves…
And we’re speeding toward AGI, so consider buying some leading companies that are most likely to ride this megatrend – but don’t overlook their valuations.
We’ll keep you updated on all this and more here in the Digest.
Have a good evening,
Jeff Remsburg
