TheBRRR’s Thoughts

GM.

Inflation data hit the tape yesterday and today, and it only fueled the narrative that the Fed is done raising interest rates and will sooner cut them than most had previously expected.

By the numbers:

• CPI (Consumer Price Index):

  • November CPI rose modestly by 0.1%, as expected

  • Yearly rise at 3.1% vs 3.0% expected

  • Shelter costs led the way higher, climbing 0.4% in Nov.

• PPI (Producer Price Index):

  • Nov PPI was flat m/m vs 0.1% expected, showing inflation stabilization

  • Yearly PPI up 0.9% vs 1% expected

Risk assets are all mildly higher, with bitcoin bouncing back to $42k - essentially the midpoint from the top of the rally to the bottom of the recent sell off.

All eyes on Powell’s press conference later today.

Macro News

FOMC On Deck

What's Happening

The FOMC meeting, spanning Dec 12-13, has the financial world on watch.

• Market Expectations: General market sentiment suggests the end of the Fed's rate-hiking cycle, with rates expected to stabilize.
  

  • A notable 98.4% probability points to the Fed voting to keep rates unchanged​​​​.
    

• Economic Projections and Dot Plot: Focus shifts to the FOMC's economic forecasts and the "dot plot," which charts individual FOMC members' rate expectations.
  

  • The projections cover inflation, growth, and interest rates up to 2026, giving insights into the Fed's economic outlook.
    

• Divergence from Previous Projections: There's a notable gap between the Fed's earlier projections and current market realities.
  

  • The September dot plot indicated a median rate of 5.6% by the end of 2023, but the actual rate remains lower. For 2024, while the Fed's projection suggested a 50-basis-point reduction, market pricing hints at significant cuts, possibly between 4% and 4.25%​​.
    

• Recent Financial and Macro Developments: Since the November FOMC meeting, there's been a nearly 80-basis-point drop in the 10-year Treasury yield and a 12% rise in the iShares 20+ Year Treasury Bond ETF, suggesting market anticipation of lower interest rates.
  

  • Job reports showed stronger-than-expected growth, while inflation figures aligned mostly with annual projections, though slightly higher in the monthly headline rate​​.
    

• Fed's Anticipated Approach: Given these developments, the Fed seems poised for a "wait and see" approach, likely to be echoed in Powell’s press conference.
  

  • The emphasis will be on patience and caution against jumping to conclusions about future policy changes​​.

Why It Matters:

• Interest Rate Stabilization: The anticipated decision to maintain current rates signals a pause in the aggressive rate hikes seen earlier, impacting borrowing costs, investments, and the broader economy.
  

• Economic Projections & Policy Direction: The FOMC's projections and dot plot give vital clues about future monetary policies, influencing market strategies and investor confidence.
  

• Market Responses: The market's reaction to these developments, including changes in bond yields and stock market movements, provides real-time feedback on investor sentiment and economic outlook.
  

• Powell's Stance: Powell's statements are crucial for understanding the Fed's current thinking and future direction, especially regarding inflation control and economic growth.

  Benzinga

Tech News

Epic Games Vs Google Lawsuit: Win For Little Guy

What Happened:

• Epic's Victory Against Google: Epic Games, the maker of "Fortnite," has won a significant antitrust lawsuit against Google. The jury unanimously sided with Epic, endorsing its claim that Google held a monopoly in the Android marketplace​​​​.
  

• Allegations and Implications: The lawsuit accused Google of suppressing competition and imposing high charges. Epic's win may pave the way for alternative app stores on Android, potentially disrupting Google's control over app distribution on its platform​​​​.
  

• Revenue Perspective for Google: This legal defeat could lead to significant financial implications for Google. Allowing rival app stores on Android may dilute Google's revenue stream from app sales and in-app purchases, as developers and consumers might gravitate towards alternate platforms with potentially lower fees.

• Wider Industry Impact: This ruling could set a precedent impacting other tech giants, notably Apple, which faces similar antitrust allegations.

Why It Matters:

• Shift in App Marketplace: Epic's victory signifies a potential shift in the app marketplace dynamics, challenging the long-standing dominance of Google in the Android ecosystem.
  
  Google's Revenue and Adaptation: The decision may force Google to alter its business model for the Play Store, impacting its revenue streams and necessitating strategic adaptations.
  

  PC Gamer

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The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.