Market Pulse With Dan Sheehan

Good morning investors,

Markets demonstrate meaningful recalibration following Fed Chair Powell's decidedly hawkish stance, suggesting the recent post-election momentum faces policy-driven headwinds. Futures indicate defensive positioning across major indices as investors process evolving rate expectations.

Market Framework

Powell's commentary dramatically shifts the monetary policy landscape, emphasizing economic strength rather than rate cut urgency. The pronounced decline in December cut probability below 50% reflects evolving recognition that robust growth may warrant sustained restrictive policy. This recalibration suggests careful discrimination between sectors benefiting from economic resilience versus those requiring lower rates.

Corporate Performance

Technology Evolution Applied Materials' cautious outlook illuminates the widening gulf between AI-driven demand and broader semiconductor trends. While traditional chip equipment faces headwinds, the finalized TSMC Arizona subsidy demonstrates sustained domestic semiconductor momentum. This bifurcation creates selective opportunities amid evolving supply chain dynamics.

Healthcare Transformation Vaccine sector turbulence following the RFK Jr. nomination suggests potential regulatory framework evolution. Beyond immediate pricing pressure, this development raises broader questions about healthcare innovation incentives and approval pathways requiring strategic repositioning.

M&A Development

Consumer sector consolidation faces increased complexity as demonstrated by the Tapestry-Capri termination. This outcome suggests careful reconsideration of scale-driven strategies, particularly given enhanced regulatory scrutiny of market concentration.

Investment Landscape

Berkshire's portfolio evolution provides valuable insight into consumer behavior expectations. The strategic entry into Domino's alongside reduced exposure to discretionary retail suggests shifting views on consumer spending patterns amid persistent inflation.

Economic Calendar

Today's data releases warrant careful attention:

Retail Sales (8:30 AM ET)

• Consensus: +0.3% monthly increase
• Prior: +0.4% gain
• Ex-auto expectation: +0.3%
• Control group forecast: +0.3%

Industrial Production (9:15 AM ET)

• Forecast: -0.3% monthly decline
• Capacity utilization expected: 77.2%
• Manufacturing component: -0.5% projected

NY Fed Manufacturing (8:30 AM ET)

• Consensus: -0.70
• Previous: -11.90
• New orders and employment components key

Import/Export Prices (8:30 AM ET)

• Import prices expected: -0.1%
• Export prices forecast: -0.1%
• Year-over-year trends crucial for inflation framework

Global Framework

Alibaba's performance illuminates persistent Chinese consumption challenges despite policy support measures. The divergence between profit growth and revenue moderation suggests careful evaluation of emerging market exposure amid evolving trade dynamics.

Strategic Outlook

Current market positioning requires sophisticated discrimination between policy-driven consolidation and fundamental opportunity. Small cap exposure warrants particular attention given relative valuation levels and domestic focus amid global uncertainty.

The interaction between monetary framework evolution and political clarity suggests increasing emphasis on company-specific execution rather than broad sector allocation. This environment rewards careful security selection over thematic positioning.

As always, feel free to reach out with questions about positioning for these evolving market dynamics.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered as investment advice. Always consult with your financial advisor about your specific situation.