Inflation worries are rising again…

Thoughts of the Day

According to the Survey of Consumer Expectations conducted by the New York Federal Reserve, consumer expectations for inflation over the 1-year horizon ticked higher to 3.3% in April, higher than the 3% in March, marking the highest level since November 2023. This follows a string of disappointingly higher-than-expected inflation data in the past few months. 

The importance of the Producer Price Index (today) and Consumer Price Index (Wednesday) data that will be released this week cannot be underestimated. Should they show that inflation … Subscribe to read the full report.

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Something Interesting

To some, this image might just be a random picture. But this was posted by Roaring Kitty (@theroaringkitty on Twitter, Keith Gill) yesterday, his first tweet in 3 years, causing a +74.40% move in GameStop (NYSE: GME) and a +78.4% move in AMC (NYSE: AMC) yesterday and both stocks went up another 20+% in after-hours trading. But why is such a nondescript picture posted by this social media influencer causing such a huge uproar?

Well, Keith previously turned $53K into $48 million when GameStop’s stock price peaked after posting on WallStreetBets on reddit (check out the movie Dumb Money) and is heralded by the masses as the leader of the army of retail traders who took on sophisticated hedge fund traders who were short $GME. As a result, this seemingly cryptic message might be a sign that he is on the lookout for something after disappearing since mid-2021.

Day Ahead

US Producer Price Index (headline and core: +0.2% Month-on-Month expected and prev)

Federal Reserve Chair Powell is due to speak at the Netherlands’ Foreign Bankers’ Association, in Amsterdam.

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What Happened Yesterday

Market Movements as of New York Close 13 May 24

Fedspeak:
Jefferson (current voter, known neutral):
“The decline in inflation has attenuated. Inflation is a source of concern. The labour market has been very resilient. It is appropriate that we maintain the policy rate in restrictive territory.”
(This is a major reversal from Jefferson’s previous comments of a rate cut expectation this year.)

The US stock market opened higher from Friday. It then traded lower following the release of the New York Fed survey which showed Consumer Inflation Expectations rising to +3.3% from +3.0% (more details in headline 1). The US stock market then traded sideways through the rise of the session. The S&P 500 finished almost unchanged on the day (high: +0.28%, low: -0.22%), the Dow Jones fell -0.21% (high: +0.34%, low: -0.28%) while the Nasdaq increased +0.21% (high: +0.40%, low: -0.07%).

The crypto market experienced a slight boost yesterday (intraday boost –  Bitcoin: +3.9%, Ether: +4.2%) as Tokyo-listed Metaplanet, an early-stage investment firm, announced that it will adopt bitcoin as a reserve asset to hedge against Japan’s debt burden and yen volatility.
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Headlines & Market Impact

Inflation outlook rises, fueled by expected increases for housing costs, New York Fed survey shows

Notable Snippet: Consumers in April raised their expectations for price increases both in the near and longer term, fueled by higher inflation in home prices along with fuel and energy, according to a New York Federal Reserve survey released Monday.

The central bank’s New York district reported in its monthly Survey of Consumer Expectations that the outlook increased across the one- and five-year horizons as respondents expressed little confidence the Fed will reach its 2% inflation goal anytime soon.

On a one-year basis, the expectation increased to 3.3%, up 0.3 percentage point from March and the highest since November 2023. For the five-year outlook, the expectation rose to 2.8%, up 0.2 percentage points. However, at the three-year horizon, the outlook fell to 2.8%, down 0.1 percentage point.

Respondents to the survey indicated they expect median home price growth of 3.3% over the next year, up 0.3 percentage point from a level that had remained steady for seven months. That was also the highest reading since July 2022 and boosted by those with a high school degree or less, a lower-income cohort of particular worry to Fed officials during a period of surging inflation that took off in early 2022.

Along with expected higher home costs, respondents see rents rising 9.1%, up 0.4 percentage point from the prior month.

Employment expectations in the survey were mixed, with unemployment seen rising though the perceived probability of losing one’s job declined. However, the mobility outlook decreased, with 50.9% expecting to find a job quickly after losing their current job, the lowest reading since April 2021.

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Microsoft and Amazon to invest $5.6 billion into France as Macron courts tech giants

Notable Snippet: Microsoft said in a statement Monday that it’s committing 4 billion euros ($4.3 billion) toward expanding its cloud and AI infrastructure in France, in addition to funding AI skilling and support for France’s technology industry.

The company said it plans to bring up to 25,000 of the most advanced GPUs, or graphics processing units, to France by the end of 2025. Microsoft will also train 1 million people and support 2,500 AI startups by 2027.

The announcement was made during the “Choose France” summit, a gathering dedicated to encouraging foreign investment in France.

Amazon, meanwhile, made a commitment of its own to invest 1.2 billion euros in France.

The money will go toward creating more than 3,000 jobs in France — in addition to the 2,000 new jobs Amazon’s already announced for 2024 — as well as broadly increasing the company’s footprint in the country, according to Frederic Duval, Amazon’s country manager.

“The expansion of our logistics network supports local economic development, creates quality jobs and allows us to reduce the carbon footprint of our deliveries while improving the overall customer experience,” Duval said in a statement Monday.

Collectively, the commitments from Microsoft and Amazon to France amount to $5.6 billion of funding. In total, France reportedly bagged a record 15 billion euros of investment commitments from foreign companies at the annual Choose France summit on Monday.

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OpenAI unveils new AI model as competition heats up

Notable Snippet: ChatGPT maker OpenAI said on Monday it would release a new AI model called GPT-4o, capable of realistic voice conversation and able to interact across text and image, its latest move to stay ahead in a race to dominate the emerging technology.

New audio capabilities enable users to speak to ChatGPT and obtain real-time responses with no delay, as well as interrupt ChatGPT while it is speaking, both hallmarks of realistic conversations that AI voice assistants have found challenging, the OpenAI researchers showed at a livestream event.

“It feels like AI from the movies … Talking to a computer has never felt really natural for me; now it does,” OpenAI CEO Sam Altman wrote in a blog post.

Microsoft (MSFT.O), opens new tab-backed OpenAI faces growing competition and pressure to expand the user base of ChatGPT, its popular chatbot product that wowed the world with its ability to produce human-like written content and top-notch software code.

At the livestream event, OpenAI researchers showed off ChatGPT’s new voice assistant capabilities. In one demo, ChatGPT used its vision and voice capabilities to talk to a researcher through solving a maths equation on a sheet of paper.

In another demo, researchers showed the GPT-4o model’s capability of real-time language translation.

OpenAI’s demonstrations verged on science-fiction, with ChatGPT and its interlocutor at one point engaging in coquettish banter. The OpenAI researcher told the chatbot he was in a great mood because he was demonstrating “how useful and amazing you are.”

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Phan Vee Leung
CIO & Founder, TrackRecord