Fed’s Hawkish Pivot, AI Booms, Tesla’s Tax Trouble 🚗, and More!

Author

The Hamilton
December 19, 2024

Daily Financial Newsletter, by Uncle Rich

Thursday December 19th, 2024

TL;DR

The Federal Reserve’s hawkish stance suggests opportunities in defensive stocks like $JNJ and dividend ETFs, while rising market volatility might benefit hedges like $SH. The rebound from recent market sell-offs presents buying opportunities in oversold tech like $AAPL and $MSFT, alongside financials via $XLF. AI’s rapid growth, highlighted by Perplexity’s valuation surge, makes $NVDA, $PLTR, and $BOTZ attractive. Activist moves in $KBR could unlock value, while Japanese EV laggards like Honda and Nissan spotlight leaders like $TSLA and $RIVN. Regulatory issues weigh on $ACI, making $KR a safer grocery pick. Tesla’s tax uncertainties create trading opportunities with options, while $SNOW and $PLTR benefit from Databricks-driven AI interest. M&A activity boosts ETFs like $XLV, while bond yields make $BND and $TLT appealing. India’s economic growth favors $INFY and $INDY, and CEO optimism suggests gains in $AAPL and $AMZN. Meanwhile, SoftBank’s U.S. investments could benefit $TMUS and $AMT, and natural gas ETFs like $UNG present rebound potential amid price declines. Keep an eye on sectors with M&A or activist activity and avoid opaque Wall Street products.

Daily News and Alpha

1. Federal Reserve Signals Plan to Slow Rate Cuts
The Federal Reserve's hawkish tone indicates higher interest rates for longer, pressuring growth stocks while benefiting defensive sectors.

  • Trade Idea: Consider dividend-paying stocks like $JNJ (Johnson & Johnson) or $PG (Procter & Gamble). Hedge against market downturns with inverse ETFs like $SH (Short S&P 500).

2. US Stocks Rebound from Worst Sell-Off Since August
The market rebound offers an opportunity to invest in oversold sectors such as technology and financials.

  • Trade Idea: Buy fractional shares of $MSFT (Microsoft) or $AAPL (Apple) to ride the tech recovery. Consider $XLF (Financial Select Sector ETF) for exposure to financial stocks.

3. Real-Estate Manager Lafayette Settles Covid Fraud Case
Negative sentiment around real estate management may create buying opportunities in the broader real estate market.

  • Trade Idea: Invest in REIT ETFs like $VNQ (Vanguard Real Estate ETF) or individual REITs like $O (Realty Income) for consistent dividends and quality property exposure.

4. Perplexity's Value Triples to $9bn
The surge in AI valuations underscores the growth potential in the AI sector.

  • Trade Idea: Invest in $NVDA (NVIDIA) for its leadership in AI hardware or $PLTR (Palantir) for software applications. Diversify with AI-focused ETFs like $BOTZ.

5. Government Contractor KBR Draws Activist Investor
Activist involvement often leads to stock price appreciation through restructuring or divestitures.

  • Trade Idea: Buy shares of $KBR (KBR, Inc.) to capture potential upside from a breakup or operational improvements.

6. Honda and Nissan Need Off-Road Thinking to Solve EV Challenge
Japanese automakers' EV struggles highlight opportunities in leading U.S. EV manufacturers.

  • Trade Idea: Invest in $TSLA (Tesla) for its dominant position or $RIVN (Rivian) for growth potential. Add $LTHM (Livent) for exposure to EV battery materials.

7. Food Fight With Kroger Spells Trouble for Albertsons
Antitrust concerns weigh on Albertsons, but Kroger’s robust fundamentals offer a safer play.

  • Trade Idea: Buy $KR (Kroger) on pullbacks. Avoid $ACI (Albertsons) until regulatory uncertainties clear.

8. Tesla's Tax Nightmare

  • Trade Idea: Use options strategies. Sell $TSLA puts for income or buy calls to speculate on a rebound during periods of volatility.

9. Databricks' Valuation Soars to $62 Billion
While Databricks is private, similar publicly traded companies in data and AI are poised for growth.

  • Trade Idea: Buy $SNOW (Snowflake) or $PLTR (Palantir), which are benefiting from the same analytics and AI trends.

10. Is M&A Back?
A resurgence in mergers and acquisitions could drive gains in deal-heavy industries like healthcare and tech.

  • Trade Idea: Invest in $XLV (Health Care Select Sector ETF) or $QQQ (Nasdaq-100 ETF) to capture potential upside in these sectors.

11. Fixed-Rate Annuities Sales Boom
Rising interest rates are driving demand for bonds and fixed-income investments.

  • Trade Idea: Buy bond ETFs like $BND (Vanguard Total Bond Market ETF) or Treasury ETFs like $TLT to benefit from higher yields.

12. Private Equity's Renaissance Man Passes Away
David Bonderman’s legacy may renew interest in private equity firms.

  • Trade Idea: Invest in $BX (Blackstone) or $KKR (KKR & Co.) for exposure to private equity gains. Consider $PSP (Invesco Global Listed Private Equity ETF) for diversification.

13. Corporate India's Conundrum
India's growing economy creates opportunities in tech and outsourcing sectors.

  • Trade Idea: Invest in $INFY (Infosys) or $WIT (Wipro). Broader exposure can be achieved with the $INDY ETF (iShares India 50 ETF).

14. The Biggest News Stories of 2024

  • Trade Idea: Use broad market ETFs like $SPY (S&P 500 ETF) or $VOO (Vanguard S&P 500 ETF) for diversified market exposure.

15. Complex Financial Products Flood Wall Street
Opaque products increase risks for retail investors; stick with simpler investments.

  • Trade Idea: Focus on transparent ETFs like $IVV (iShares Core S&P 500 ETF) or solid blue-chip stocks like $GOOGL (Alphabet).

16. Ken Moelis Predicts the Demise of the M&A Banker
Capital markets expertise is becoming increasingly valuable in finance.

  • Trade Idea: Buy $GS (Goldman Sachs) or $MS (Morgan Stanley) for exposure to firms pivoting toward capital markets.

17. Nippon-U.S. Steel Deal Faces Criticism
Regulatory uncertainty could pressure the stock price of deal participants.

  • Trade Idea: Monitor $X (U.S. Steel) and consider buying on dips. Positive resolution typically boosts stock prices.

18. CEOs Feeling Upbeat About the New Year
CEO optimism often signals growth opportunities in leading sectors.

  • Trade Idea: Invest in companies with strong earnings guidance, like $AAPL (Apple) or $AMZN (Amazon), to capture upside.

19. SoftBank's $100 Billion Investment in U.S. Projects
SoftBank’s investment will likely target tech and telecom industries.

  • Trade Idea: Watch $TMUS (T-Mobile) and $AMT (American Tower) as potential beneficiaries of this funding.

20. U.S. Natural Gas Futures Post Moderate Loss
Seasonal demand and geopolitical events could create opportunities in natural gas.

  • Trade Idea: Buy $UNG (United States Natural Gas Fund ETF) or $FCG (First Trust Natural Gas ETF) to capitalize on potential rebounds.

Deeper Dive of the Day 🤿

AI Valuations Surge with Perplexity’s $9 Billion Funding Round

The explosive growth of AI was underscored by Perplexity's recent funding round, tripling its valuation to $9 billion. This highlights the insatiable appetite for AI-driven solutions across industries. For investors, the AI sector continues to present a compelling long-term opportunity, as advancements in generative AI and machine learning reshape business processes. Companies like NVIDIA ($NVDA), which provides essential hardware for AI development, remain a cornerstone of the sector. Similarly, Palantir ($PLTR) is positioning itself as a leader in AI-powered data analytics for enterprise and government applications. Investors should also consider AI-specific ETFs like $BOTZ for diversified exposure, which mitigates single-stock risk while capitalizing on the broader growth of the sector.

To take actionable steps, retail investors can look for potential pullbacks in $NVDA, which often sees profit-taking after significant rallies, providing an entry point. For Palantir, closely monitor their earnings reports and product updates—positive growth in their AI offerings can significantly impact stock performance. Additionally, explore companies poised to benefit from AI adoption beyond tech, such as those in the healthcare and financial sectors that are increasingly integrating AI to optimize operations. For more speculative plays, keep an eye on upcoming IPOs from private AI unicorns like Databricks, which could offer fresh opportunities to ride the AI wave. Combining established leaders with diversified AI exposure offers a balanced strategy to benefit from this transformative trend.

The Hamilton Team

Disclaimer:
The information provided is for general informational and educational purposes only and should not be considered as financial or investment advice. This content reflects opinions and analysis based on publicly available information and is not tailored to your specific financial situation or investment goals. Always consult with a qualified financial advisor or conduct your own research before making any investment decisions. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.