Pro Perspectives 2/1/24






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February 01, 2024

After the Fed yesterday, we talked about the shrug given from the interest rate market. Despite Jerome Powell’s best efforts yesterday to curb enthusiasm about the rate outlook, rates slid even lower today.

And we talked about this big trendline that was testing in stocks, following yesterday’s sell-off.

Remember, we had a similar chart/similar trendline in the Nasdaq, Dow and Russell 2000.

My view: If this shallow dip in stocks were to hold this line, bounce, and make new highs, it would be extremely bullish for stocks — confirming the boom from the generative AI-driven technology revolution.

That was the case today, at least in the S&P futures.  And, fittingly, it traded to new highs after the earnings from three of the tech giants late this afternoon.  Amazon, Meta and Apple all put up big numbers.

So, we’ve now heard from the big four tech giants that are working on the frontier of generative AI (Microsoft, Google, Amazon and Meta).  It’s all about generative AI.

They’re all building data center capacity to handle AI workloads and they are all working on commercializing generative AI products for their customers.  And it’s clear they are already benefiting internally from the productivity enhancements of generative AI.

As we’ve discussed over the past couple of quarters, this (gen AI) technological revolution is productivity enhancing for the economy.  It’s a formula to grow the economic pie (and the size of the stock market).

We averaged just 1% productivity growth for the decade prior to the pandemic, and negative 0.7% since the fourth quarter of 2020 (through the middle of last year).

We had almost 5% productivity growth in Q3.  And the Q4 report came in this morning, at 3.2% growth.  We are in a productivity boom.

As we’ve discussed in my daily notes, high productivity growth is a driver of higher long-term potential economic growth.  With that, we shouldn’t be surprised by the strength of the economy, though the Wall Street and economist community continue to be.

And as you can see in the chart below, early indications on Q1 growth look like more of the same …


For my AI-Innovation Portfolio members, please keep an eye out for a note from me tomorrow morning.  We will be making a new addition to the portfolio.  If you are not a member, you can join us here.