It’s a pretty busy week as we wrap up the first month of the new year.
Obviously, the FOMC Meeting and PPI take priority on the macro front. Expectations going into the week are that neither is likely to upset the consensus on the economy.
As for earnings, investors will get updates from Microsoft, Meta, Tesla, and Apple in the latter half of the week:
Microsoft is an Azure story, but I attribute the recent downtrend to OpenAI pessimism. If earnings aren’t the problem, don’t expect them to be the solution. Sadly, this means it is possible we get another amazing quarter that is underappreciated. I wouldn’t buy puts to bet on it, but it has stopped me from meaningfully adding on the recent weakness.
Meta is in a similar situation. Earnings are not the problem. Investors rewarded the company as it made splashy talent acquisitions; now, investors want to see what the company has planned. In my opinion, Meta has successfully integrated AI to combat TikTok in the eternal battle for our screen time. However, when you spend $14B to acquire a 49% stake in Scale AI just to hire their CEO, Alexandr Wang, to lead internal AI development at Meta… shareholders need more than just “beating TikTok”… and, Zuckerberg has promised much more than that.
Tesla… well, the stock does better when the EV business does. Part of that is because when the EV business performs, the company’s financial metrics improve, which increases the credibility of everything the C-suite — including Elon Musk — has to say about future plans. When the EV business underperforms, the financial metrics follow, which makes future plans look “pie-in-the-sky” instead of innovative and daring. Just my 2 cents.
Apple is an iPhone story. I recent called the chart the “Most Interesting in the Mag 7.” In a sentence, if iPhone sales are what we expect them to be, anticipate a major bounce back.
Beyond the macro and the micro is more geopolitical drama. Trump went “surprised-Pikachu-face” when Canada decided to knock on Xi’s door after he treated the longtime ally like an unsolicited Jehovah’s Witness interrupting an atheist’s Sunday for the last year. He has since threatened them with 100% tariffs if they come to an agreement with China.
In my opinion, this behavior has all but ensured a future where U.S. allies seek “strategic hedging” (for lack of a better term) with unconventional (and perhaps even adversarial) nations. When sovereignty is treated as conditional rather than absolute, allies lose faith in the existing security umbrella. Allies seeking strategic hedges aren’t looking for new friends to start a fight. They’re looking for an insurance policy to protect their independence from their own supposed partners.
My opinion aside, I would expect we start the week somewhat at the mercy of geopolitical headlines. My hope is that these headlines don’t interfere with what I anticipate to be a pretty solid week for earnings and the economy.
For those trading, understand this week is riddled with landmines—not time bombs—and you need to be ready at any instance for these landmines to be tripped. I would approach this by decreasing position size and increasing your upside/downside exit prices.
For those investing, get out your ear protection. I expect it’ll be noisier than usual. As such, don’t overreact to the first, second… or even third Truth Social post; don’t rely on the immediate post-earnings reaction to make a determination on the quality of earnings.
You all got this. Good luck nonetheless; see you next week.
Monday
Plenty Schedule, None Important Enough To Mention
Tuesday
Consumer Confidence (Jan.) | 90.0 est. & 89.1 prior | 1000
UnitedHealth Group (UNH) | BTO
The chart on this finally looks compelling, tallying three straight advances since recapturing the 200d SMA after many failed attempts. You can wait for the earnings before getting in. I am already in the name, but I think if bulls are right to be asserting themselves right now, you can get in after bullish confirmation at the earnings and still make a nice profit.
UPS (UPS) | BTO
The Dow Transports recently made new all-time highs, which is very bullish for students of Dow Theory. UPS has helped the index on the upside. I’m not intimately familiar with UPS, but given the sector is picking up positive momentum, this is a great place to look for less obvious opportunities that still have plenty of catching up to do.
Wednesday
FOMC Meeting
Interest Rate Decision | No Change to Fed Funds | 1400
Press Conference | 1430
ASML (ASML) | BTO
This is one of INTC’s biggest capital equipment manufacturers. Check out my most recent “11 on 11” for a little more on this, but the biggest beneficiary of the demand surplus and supply shortfall at INTC is ASML. That said, the market is already keen on this. If ASML falls after what I expect to be a business-as-usual affair, I’ll expect to jump in.
Thursday
Initial Jobless Claims | 202k est. & 200k prior | 0830
Friday
Produce Price Index MoM (PPI, December) | 0.2% est. & 0.2% prior | 0830
Core PPI MoM | 0.3% est. & 0.0% prior | 0830
Core PPI YoY | No Estimate Available & 3.0% prior | 0830
PPI YoY | No Estimate Available & 3.0% prior | 0830
American Express (AXP) | BTO
My favorite in the credit card space is technically stuck between the 50d and 100d SMAs. Given what we’ve heard from the airlines and the banks, I expect the affluent clientele AXP serves to produce another great quarter. If the market believes Trump will TACO on the 10% cap, I expect it’ll be enough for a retest—and, fingers crossed, a break above—of the all-time high. I have a position here.
Key
Macro Economic Events
Corporate Earnings
High Importance
Gorilla With Glasses 