TL;DR
- Fed Chairman Jerome Powell has given his speech at the annual conference in Jackson Hole, Wyoming today, stating that inflation is still too high and more hikes might be needed
- The electric vehicle industry is coming under pressure, with government subsidies being pulled back and many automakers slashing prices
- Trends in investing (like electric vehicles) can be powerful for creating wealth, but the challenge is picking them
- Top weekly and monthly trades
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Major events that could affect your portfolio
Inflation has come down significantly from its heady highs of mid-2022, but according to Jerome Powell, “It remains too high.” Ok, that’s not really what we want to hear from the man who is essentially in charge of the country’s interest rates (with the help of his friends in the FOMC).
He went on to say that the Fed is “Navigating by the stars, under cloudy skies.” Right, well that sounds even worse.
The comments came at the Fed’s annual conference in Jackson Hole, where he gave a speech to policymakers on their position on the current level of rising prices. While the Fed’s target range is between 2% and 3% and inflation is hovering around 3%, Powell has made it clear that they want to see it at that lower figure before considering easing rates.
For investors, it means the roadmap is pretty clear. “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”
Rate decisions will be big market movers whether they’re up or down, and inflation and economic figures will be closely watched to provide clues as to which direction this is going to be each month. So far the market has shaken off rate rises this year, but with much more weakness in earnings forecasts, the impact of any further rate rises could be significant.
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Tesla has made significant cuts to their prices to stay competitive with the rapidly increasing competition from traditional car makers. These aren’t just little tweaks to the sticker price either, with the Model S base price down 25% and the Model X down 27% since the beginning of the year.
And it’s not just in the U.S. Some of the biggest hits to the industry are happening in China, with GM Chevrolet in the country dropping their prices by around 25%, and Volkswagen offering incentives of $8,200 for its ID.6X joint venture.
All in all, the EV hype appears to be slowing down. Particularly with current cost of living pressures, electric vehicles (which are often higher cost compared to ICE vehicles) may not be an attractive proposition for drivers right now. While that might be worrying for some investors, it’s more than likely just another example of the Gartner Hype Cycle in action.
Any new technology starts with the early adopters. As customer numbers increase, awareness becomes more mainstream and hype begins to build. Often, this leads to euphoria and massive over-estimations of the speed and impact of the adoption of the new technology. At this point it can appear that the ‘bubble is bursting,’ before a more stable, long term equilibrium is reached.
The dot com bubble of the early 2000’s is a perfect example.
For investors that means there’s inherent uncertainty in the future, but as always that’s an environment that provides the potential for long term returns.
This week’s top theme from Q.ai
The trends in these hype cycles can make fortunes. Like, literal fortunes. The dot com bubble is one example, but there are dozens more in recent years. Smartphones, Crypto, AI, gaming and social media have all birthed billion dollar companies and made investors millions along the way.
Some of these trends have serious staying power, while others have – how to say this politely – less compelling fundamentals (*cough* NFTs *cough*).
Either way, both short term and long term trends can be a boon for investors. The trick is identifying them, especially given the amount of news and information we’re bombarded with on a daily basis.
As you’d expect from Q.ai, we’ve come up with a solution that utilizes the power of AI to help solve this problem. In our newly launched Social Trends Kit, we task our AI with combing through data gathered from news and social media, with the aim of identifying these trends and capitalizing on them.
Specifically, our AI looks to YouTube, Instagram and Seeking Alpha to find topics and themes that are rising in popularity. But it doesn’t stop there, because not all news is good news. Our AI also conducts a sentiment analysis, to understand whether the trend is receiving overall positive or negative coverage.
It’s a dynamic Kit that has the potential to invest in a wide range of different sectors and industries, based on the trending topics of the day.
Top trade ideas
Here are some of the best ideas our AI systems are recommending for the next week and month.
Harmonic Inc (HLIT) – The video streaming and broadband company is our Top Buy for next week with our AI giving them an A rating in our Growth and Technicals factors. Revenue is up 8% over the last 12 months.
Baudax Bio (BXRX) – The pharmaceutical company is our Top Short for next week with our AI giving it an F rating in Low Momentum Volatility. Earnings per share was -$29.55 over the last 12 months.
Brookdale Senior Living (BKD) – The retirement home company is a Top Buy for next month with our AI rating them an A in Growth and Technicals. Revenue is up 7.9% over the last 12 months.
Dice Therapeutics (DICE) – The immunology company is a Top Short for next month with our AI giving them an F rating in Quality Value and Technicals. Earnings per share was -$2.35 over the last 12 months.
Our AI’s Top ETF trades for the next month are to invest in VIX futures and tech and to short US Treasury Bonds. Top Buys are the iPath S&P 500 VIX Futures ETF, the Vanguard Information Technology Index Fund and the Technology Select SPDR Fund. Top Shorts are the iShares 7-10 Year Treasury Bond ETF and the iShares US Treasury Bond ETF.
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