The Big Tech Takeover
Good Morning. Stocks closed in the green yesterday and more bank fears enter the market with investors bracing for the new interest rate hikes that Jerome Powell Announced on Wednesday. Investors save cash for future opportunities as concerns of economic slowdown continue. As rate hikes seems to becoming to an end it seems like the year of tech giants may be the topic of conversation for 2023. Who would have thought.
We may have all come on different ships, but we're in the same boat now...Today marks the anniversary of successful completion of the 4-day, 50-mile march led by Martin Luther King Jr
- Robert Baggetta
MORNING OUTLOOK
Recap: Traders have changed their bets regarding the Federal Reserve's next moves on interest rates. Instead of expecting an increase in rates in May, they are now betting on a rate cut as early as June, despite Chair Jerome Powell stating that rate cuts are not his preferred option. Similarly, traders have stopped expecting additional quarter-point rate hikes from the European Central Bank and the Bank of England. This shift in trader sentiment comes as global bonds have gained in value, resulting in the Treasury two-year yields falling to their lowest level since September.
BANKS
Unlimited Insurance?
As we all know, bank deposits are insured up to $250,000 through premiums banks pay for coverage. And for the average Joe this can be plenty (avg bank balance being around $42,000). However, for Silicon Valley Bank's sake, around 94% of its deposits were over $250,000. This triggered the bank run and caused the recent turmoil we've seen.
New Plan?: Experts and regulators are now thinking of insuring most, if not all of your bank deposits are covered by insurance...crazy right? Well, as crazy as this sounds it might not be a bad idea going forward from now. The current deposit insurance system today resembles a Depression-era stopgap that went into effect in 1934...and with the recent bailout of SVB we might see new regulations take stand to further decrease the probability of bank runs in the future. This change can increase consumer confidence and lead ordinary depositors to feel safe about their funds, in turn decreasing the chances of massive withdrawals.
At the Moment: As of right now, the main goal is to protect transaction accounts that businesses maintain to cover payroll and other routine bills. We will most likely see a ramp-up in regulation regarding insured deposits and bailouts in the next coming weeks, with the Vice Chair of Supervision holding a conference next week talking about new plans for the 'sound banking system.' Why are there so many new changes? Bank runs can cause businesses to be unable to withdrawal funds, in turn, pay people's salary, causing a depression (With a few other factors of course). Fed plans going forward will be crucial to the economy.
CANADA
Migrant Slowdown
On Friday March 24th, the Canadian dollar saw a nine-day low against its U.S. counterpart. Although a small change, many Canadians are worried that their dollar soon might be worth a lot less then it was years before.
Market analysts say that Global risk aversion and equities are the main reasons for the move in Canadian currency on Friday, however wall street bounced higher after a treacherous week causing some rebound in CAD/USD. Regarding future Bank of Canada policy decisions, the turmoil has led to investors betting that they will shift to cutting interest rates this year. Money markets see a nearly 40% chance that the central bank will ease at its next policy decision on April 12. So I'd say we're looking alright...buuut you should still shop in Buffalo.
What Has Trudeau Been Doing Recently?: Canadian Prime Minister Trudeau has been awfully quiet this year. However he emerges with a MASSIVE deal (well not really) to block asylum seekers at U.S. Northern Border. His deal with Biden apprehends most migrants from attempting to cross the U.S. border into Canada.
You Shall Pass! (but legally this time): Canada has reportedly agreed to allow up to 15,000 Central American migrants into the country over the next year or so. Canada and the U.S. announce plans to make it more difficult by enforcing harsher immigration policies. Some goals of these policies are to "reduce incentives" (there were incentives?) for unauthorized crossings. More efforts to curb unauthorized entry into the US will allow legal entry to be safer, easier and more applicable then recent years.
TECH
AI Just Keeps Getting Smarter (to an extent)
As AI progression takes a big move coming into 2023 with releases of ChatGPT and Copolit. Blue-Chip companies are in a race to stike a pot of gold for whoever has the most impactful Artificial Intelligence.
ChatGPT on Roids: Microsoft's OpenAI is now adding plug-ins for ChatGPT, a massive upgrade that can expand the chatbots capabilities like giving it access to real time data and information to the web. If you thought ChatGPT was already doing this, you'd be wrong. Right now the AI only has access to 'limited' information from training data. Plug-Ins will allow AI to have "eyes and ears" on the entirety of the Internet, crushing industries and making creators feel...well...destroyed. Things like recipes, books, coding may take a hit...but its not quite there just yet.
Are You Concerned Yet?: Concerns about safety and security come into play here because allowing AI to have access to the entire internet puts information and personal knowledge at a huge risk. "It will be able to answer ANYTHING." Hey but don't worry...they've implemented safeguards to capture the risk posed by this AI. Until the AI figures out a way to bypass these safeguards...*que unnerving music.*
Not as Smart as We Thought: Googles Bard Chatbot was asked if it had been shutdown and it replied with "Yes" with a citing of a tweet of someone on Twitter saying it was shut down, when it wasn't. When I say we're in no danger...we're in no danger.
OSCILLATING PICKS
What Investors are Looking at for Next week
Next week involves a heap of news and could be a turning point for some stocks and investors sit aside with their cash on hand ready at all times. With home price updates, quarterly Personal Consumption Expenditures (PCE) updates and supervisory meetings we see a lot of FOMO ramping up as we head into the weekend. Here are some equities to keep your eye on.
BlackBerry (BB, $5.29): Blackberry has flew under the radar recently with a 4.55% gain this week. Earnings reports come out on Wednesday March 30th with expectations running lower then usual. Analysts expect a EPS of $-0.10 for BB, with experts predicting an underperformance. Recent news involving a collaboration with Adobe aims to develop safer more secure and efficient document processing...not too exciting.
Lululemon (LULU, $313.45): Lululemon has had a great week posting a 6.18% return in the past 5 days. At the high price of $313.45 per share, analysts are expecting a $4.16 EPS for the clothing company, as indicators are pointed at a 26.4% sales growth compared to prior years. It seems like LULU has continued to deliver good news, as they posted an earnings surprise of 2% in the last reported quarter, and on average they've beaten analyst predictions by 6.7%. LULU posts earnings on March 28.
Carnival Corporation (CCL, $9.23): The British-American cruise operator finished the week up 7.70% and reports earnings on March 27 next week. Analysts are expecting an EPS of $-0.62 which is an improvement of 62.4% a year ago. As cruise liners ramp up with less restricting COVID-19 regulations, the cruise liner has had success this year with a YTD price change of 15.81%. As strong demand for cruising increases, expect CCL to break out of their slump one way or another.
WORLD
TikTok Banned In France?! And More On Russia-Ukraine
Flame Sesh': France has banned the “recreational” use of TikTok, Twitter, Instagram and other apps on government employees' phones because of concerns about insufficient data security measures. The U.S. looks to do the same as progressives Warn Against Anti-Chinese Scapegoating as TikTok CEO Shou Zi Chew was grilled by House lawmakers for over five hours on the app’s ties to the Chinese government, data practices, and its effects on children’s mental health. This is Democratic Florida Congressmember Darren Soto questioning Chew. Key indicators were presented like the fact that US TikTok (which is different than Chinese TikTok) has had children taking part of dangerous challenges over the past few years. Trends like the 'Blackout Challenge' which were the cause of a girl's death were mentioned on Tuesday after TikTok CEO was grilled about not slowing down or halting the algorithm completely to stop people from participating in this idiotic challenge.
Argument was along the lines of: “Defendants did not create the Challenge; rather, they made it readily available on their site.”
The West is Officially Involved: US and Canada pledge to stand alongside Ukraine as reliable partners as Canadian Prime Minister Justin Trudeau said in an address to parliament in Ottawa alongside US President Joe Biden on Friday. Trudeau said like the US, Canada has provided “significant military support” to Ukraine, such as artillery, ammunition, armor and tanks. He said the Canadian armed forces have been training Ukrainian military members since 2015. The prime minister pointed to sanctions and other economic measures put in place by the US, Canada and other allies "to continue to deplete the Kremlin's war chest.” Trudeau called Biden a ‘’true friend to Canada,” saying that the alliance “matters more than ever in this consequential moment.”
NEWS
What else is Pulsing
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