An important government inflation metric, the Personal Consumption Expenditures Price Index (PCE), for February came in as expected on Good Friday. Since the markets were closed, as investors celebrate the three-day Easter holiday weekend, Monday, April 1, should be interesting.

 

Core PCE rose by 0.3 percent from the previous month. Year-over-year PCE prices rose by 2.8 percent, easing slightly from the 2.9 percent increase in January. The PCE is the Federal Reserve Bank's favorite inflation indicator. As such, it carries a lot more weight when determining whether the central bank will stand pat or decide to cut interest rates in the months ahead. The February numbers will likely not change the current stance of the Fed.

 

Given that both the Consumer Price Index and the Producer Price Index came in hotter than expected in both January and February, investors had worried that the PCE could do the same. It did, but so slightly that next week traders will need another reason to either push equities higher or continue the recent trend of selling large-cap tech and buying other areas like financials, industrials, small-cap, precious metals, and cyclicals.

 

The plot thickens when we consider the changes that have been going on all week behind the scenes. The stock market has just finished another strong quarter. The S&P 500 Index was 10 percent, the largest first-quarter gain in years. As is often the case, pension funds, money managers, and other investors at the end of a robust quarter are expected to adjust their asset allocations to account for the outperformance by equities. As such, pension funds, for example, were expected to sell as much as $32 billion in stocks that had outperformed the most during the quarter and invest the proceeds in the debt markets.

 

At the same time, a large hedged-equity fund, the $16 billion, JP Morgan Hedged equity Fund that holds a basket of S&P 500 Index stocks, along with options on that index, is expected to roll over its options positions on Friday. Given the low market liquidity on this holiday, that rollover could exacerbate or suppress stock market moves on Monday.

 

This week also saw Donald Trump's social media company begin trading on the NASDAQ. The Trump Media & Technology Group's main asset is Truth Social.  Readers may recall that the social media platform was established by Trump following the Jan. 6 insurrection. It was at that time when the former president was booted off social media's mainstream platforms, including Facebook and Twitter. Since then, he has been reinstated on both but has stuck with Truth Social as his main avenue of social communication with his followers.

 

The stock (symbol DJT) of which Trump is the dominant shareholder (58 percent), has exploded in price in its first week in trading and has been called the ultimate Meme stock. Like most such stocks, it is losing money and has little in the way of financials.

 

Theoretically, most shareholders have a lock-up period of at least six months before they can sell their shares. Given Trump's need for cash because of legal proceedings that have gone against him, the company's Trump-friendly board of directors could waive or shorten the lock-up period.

 

That could turn messy, however, because a sale by the majority shareholder would likely depress the stock price. That would allow shareholders to show injury and give standing to lawsuits on behalf of public shareholders. More should be revealed in the weeks ahead.

 

In any case, stocks overall have continued to rise and have traded higher than my best-case forecast of 5,240 on the S&P 500 Index. On Monday, because of all this rebalancing and the outcome of the PCE data, we could see the markets react strongly one way or the other. The best I can say is that April Fool's Day may be nothing to fool around with.

 

By the way, my cataract surgery on my left eye came off without a hitch, which was why there was no column last week. I get my right eye done on April 3, so unfortunately no columns next week either. 

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

February inflation data showed no progress on inflation. That follows the same kind of readings from the previous month. While two months does not make a trend, the disappointing numbers gave investors pause.

 

Both the Consumer Price Index (CPI) and its cousin, The Producer Price Index (PPI), came in warmer than economists had expected. Consumer prices rose 3.2 percent in February from a year earlier but were only slightly higher than economists' expectations of 3.1 percent. The PPI rose 1.6 percent year-over-year, which was the largest gain since last September. Month-over-month, the PPI at +0.6 percent was double the average forecast.

 

These data points should be taken with a grain of salt since a couple of higher numbers should be expected. Few, if any, macroeconomic trends travel in an uninterrupted straight line higher or lower.  Unfortunately, these results practically guarantee that the Federal Reserve will hold off on any plans to cut interest rates.

 

No one was expecting the Fed to cut in March anyway. In Chairman Powell's most recent statements, he indicated March was off the table. But now, the earliest the market can expect a cut will be in June, if then. Markets are now pricing in about a 59 percent chance of an interest rate cut in June. Given that economic growth and employment trends remain strong, some argue that the Fed need not reduce interest rates at all this year.

 

Any hint of no cuts ahead would not be taken kindly by the markets. That is because much of the gains in financial markets, whether in bonds, equities, precious metals, commodities, crypto, etc., have been fueled by investors' expectations that the Fed is planning on reducing interest rates at least three times this year.

 

As such, the FOMC meeting notes will be released on the afternoon of March 20, and I suspect every word will be analyzed with a microscope. Chairman Powell's Q&A session afterward will also be subject to the same scrutiny. I don't expect that Powell will deliver a nasty downside surprise. After all, this is an election year, and while the Fed is supposed to be "non-political," I doubt they would want to upset the economic apple cart and influence one side or the other.

 

As readers are aware, I believe the stock market is in the ninth inning of this rally. This week, the high on the S&P 500 Index was less than 44 points away from my top-of-the-range 5,220 target. I've noticed some changes in the market behavior while we made that new high. The momentum that has been driving stocks since the beginning of the year is beginning to wane and, in some areas, even reverse. The action of late has been wild and there are some signs of short-term topping patterns.

 

The technology sector, for example, which has led the market all year, is beginning to struggle. Semiconductors have been choppy. Nvidia, the quintessential AI stock, is no longer going up 2-3 percent per day. It is now down about 100 points from its all-time high. Some stalwarts of the market like Apple, Google, and Tesla (to varying degrees) seem to be rolling over. Some say that where Apple goes, so goes the market. 

 

In this risk-on environment, the declining dollar has been supporting commodities, especially gold and silver. However, the greenback, which is the world's safest trade, has flattened out and may be starting to bounce as traders worry that lower inflation is not quite in the bag. All of this tells me to be cautious and while we could still climb higher, I would have one eye on the exit.

 

Readers, please be aware that due to two upcoming medical procedures, there will be no columns next week, and again none during the week of April 1.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

At this point, a day without a new high seems almost abnormal. AI stocks rage higher, joined by weight loss companies like Lilly. The good news keeps rolling in with even Chairman Jerome Powell of the Federal Reserve Bank seemingly more dovish. 

 

The Fed chairman testified before both the House and Senate this week. He indicated that we could expect a couple of interest rate cuts this year if the inflation data continues to weaken. He also said that if it does, the Fed won't wait until inflation hits its 2 percent target before loosening monetary policy.

 

The economy continues to grow, and while there is some evidence that labor growth is moderating in certain sectors, the latest non-farm payroll numbers for February — a gain of 275,000 jobs — were higher than expected. However, the headline unemployment rate hit 3.9 percent from 3.7 percent in January.

 

Bottom line: there are still plentiful jobs available for anyone who wants one. Wage growth, however, is slowing (0.1 percent versus 0.2 percent month over month). That is helping to rein in inflation. The macroeconomic data is helping to boost the good cheer within the financial markets.

 

Even the problems that have beset a large regional bank, New York Community Bank (NYCB), did nothing to dent the armor of the bulls. This regional bank merged with a troubled Michigan mortgage lender, Flagstar Bank, in a $2.6 billion deal last year during the regional bank crisis. The merger pushed the combined bank near a $100 billion regulator threshold, which imposes stiff capital rules on banks over that level.

 

The consensus on Wall Street is that NYCB's increased exposure to the commercial real estate market, plus the new requirements, forced the bank to slash its dividend in January. That sent NYCBs' stock diving, which in turn sparked credit downgrades.

 

This week, as the bank's stock price was in free fall, several investment firms, including Steven Mnuchin's Liberty Strategic Capital, Hudson Bay Capital, and Reverence Capital Partners injected more than $1 billion into the bank in exchange for equity. 

 

A year ago, a related issue (remember Silicon Valley Bank) drove down equity markets. At the time, investors feared that financial contagion might overwhelm the overall banking sector. It didn't. This time around, markets barely blinked.

 

The widening of the breath of the stock markets has also increased investors’ confidence in the rally. Bond yields have fallen, and the U.S. dollar along with it. That has sparked a bull run in gold and in Bitcoin since both are considered currency equivalents.

 

But there is a little more to this story than that. Some economists and stock strategists argue that when the Fed begins to cut interest rates, the dollar is going to tumble, and the demand for alternative currencies like gold and crypto will spike higher. Throw in the fear that the country's out-of-control debt level is going to cause a crisis, and you have the makings for much higher prices. As a result, both Bitcoin and gold hit all-time highs this week.

 

As I wrote last week, we have met my first target on the S&P 500 Index of 5,140. My second higher target was 5,220-5,240. We are already halfway there as of Friday. The precious metals are over-extended and need a pullback as is the rest of the market. My advice: hold on, but not chase.

 

We continue to have at least one day a week where markets suddenly dive by more than 1-2 percent on no news.  Each time, (so far) markets rally back by the next day. Don't be lulled into believing that the dip and bounce strategy will continue to work. Somewhere up ahead there awaits a 7-10 percent correction. It could take until April before that occurs.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

One of the main complaints of market watchers has been the narrow breadth of the stock market. Few areas, besides the handful of tech stocks, have participated in the bull market this year. That has changed.

 

Biotech, crypto, financials, industrials, and even the staid healthcare sector have come to life this week. The Russell 2000 small-cap index outperformed as well. In the meantime, the Mag 7 and AI 5 marked time.

 

As I warned readers last week, I thought stocks were due for a little consolidation as traders took profits on some of the large gains accrued over the last two months. The fact that large-cap tech sold off and the markets barely budged was meaningful to me. It is an indication that there was a lot of non-tech buying under the hood of the averages.

 

The value of any one of three of the Mag 7 stocks (Microsoft, Apple, or Nvidia) is equal to the entire market capitalization of the small-cap, Russel 2000 Index. If all three were sold down at the same time (even a little), there needs to be an awful lot of buying in other areas just to keep the major averages afloat. That is what happened.

 

This week's most important data point was the Personal Consumption Expenditure Price Index (PCE), which is the Federal Reserve Bank's key inflation indicator. The PCE increased 0.3 percent month-over-month in January 2024. That was in line with market expectations. Prices for services went up 0.6 percent while goods decreased 0.2 percent. The monthly core PCE inflation, which excludes food and energy, edged up 0.4 percent.

 

All those data points came in as expected, and traders used that as an excuse to boost the market. However, nothing in the report would convince the Fed to cut interest rates in March at their next FOMC meeting on March 15-16, in my opinion. It may have been the smallest annual rise in inflation we've seen in three years, but it was still a rise. If anything, it justifies the Fed’s decision to wait until they see further headway on inflation before considering an interest rate cut.

 

The real star of the week was Bitcoin. The cryptocurrency breached $60,000 for the first time since November 2021 and came close to $64,000 before giving back some of its gains. Bitcoin is up more than 42 percent since the Securities and Exchange Commission approved spot exchange-traded funds back in January 2024.

 

With the move higher, Bitcoin has reclaimed its trillion-dollar status. But it has yet to top its all-time high made in November 2021. At that time, the coin surpassed $68,000 briefly as many panicky traders turned to the digital asset during the pandemic fears.

 

However, this week, it did hit an all-time high in 14 different countries with weaker currencies than the U.S. dollar. Some of the crypto bulls I follow predict we will break above the old high (after a pullback) and could see as high as $100,000 by the end of the year. I don't see why not.

 

We are at that stage in the markets where we could see an end to this bull run at any time. It could be today, two weeks from now, or ... The problem with that forecast is that everyone is saying the same thing. And what do the markets usually do in that situation — what is most inconvenient for the greatest number of people? In this case — up.

 

Last week we came close to my S&P 500 Index target of 5,140. Since then, we have traded down slightly, but momentum traders simply moved from buying tech to bidding up other sectors of the market. It is the financial equivalent of a game of moving chairs.

 

March is upon us, and it looks to me like we still have a little gas left in the tank. The charts say we can still go higher. Most technicians see this week's mild consolidation as no biggy. Yes, the markets are extended and overbought, but could get more so. Margin debt, which is a good indicator of speculation, stands at $702 billion as of the end of January. That is a lot of gambling money, but it is still lower than it was at the beginning of the two previous selloffs ($936 billion in October 2021, and $710 billion in July 2023). 

 

As I have written in the last few weeks we are no longer in the land of fundamentals. The markets are being driven by money flows. Momentum rules the day and as such, we could just as easily see 5,200 as we could see 4,800 on the S&P 500. I say enjoy the ride while it lasts and when we pull back buy the dip.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

At this point, few would question the economic impact that Taylor Swift has had on the world. The sheer level of spending the singer has triggered among consumers is breathtaking. The ripple effect of her business affairs has produced unexpected profits for many corporations and even countries worldwide. No wonder she is the only person from the world of entertainment to ever be on the cover of Time magazine.

 

In my day, Michael Jackson was the pop star who took the world by storm. The "gloved one" was the record breaker in the music and entertainment business every week. He made millions for himself and others. But Taylor Swift, the "anti-hero" singer who has captured the minds and hearts of millions, has largely eclipsed Michael Jackson's rise.

 

She toppled Jackson's AMA awards record at the American Music Awards recently while her Grammy awards have also broken records. Taylor's worldwide Eras Tour has garnered more than $1.04 billion which is the first tour in history to top the billion-dollar mark. She pulled in an additional $261.6 million worldwide from her movie, "The Eras Tour," thus far. That box office success also surpassed Jackson's total global take of $261.2 million for "This Is It" back in 2009. "Eras" is the highest-grossing concert or performance film of all time, recognized by the 2023 Guinness World Records.

 

However, the global impact of Swift has far transcended her economic successes. The level of spending, sales, engagement, viewership, and business synergy continues to reach new heights. Her work is benefiting countless industries, companies, and even regions throughout the world. Hotel chains, restaurants, clothing companies, transportation services, theatres, and even tourism have received substantial boosts from her endeavors. 

 

Swift has boosted business in far-off places such as Singapore where her concert has attracted thousands of fans from all over Southeast Asia. In Japan, her appearances are expected to generate more than $230 million, which would make it the country's biggest-ever musical event in terms of economic impact. Mexico saw a big jump in tourism as well during the concerts she gave last August.

 

Here at home, Swift has already generated $4.6 billion in consumer spending at last count and is expected to exceed $5 billion before the end of the year. Ticketing companies saw their stocks rise as her stadium appearances around the country produced more than $554 million in sales. Her concerts in Chicago spiked the hotel occupancy rate in Illinois with 44,000 rooms sold. Another record in her trail of records.

 

Probably the most popular episode in Swift's super-charged life is her romance with Kansas City Chiefs' tight end Travis Kelce. Their relationship blossomed as the NFL played in the background. Her appearance at games is credited with a 53 percent increase in viewership of girls between the ages of 12 and 17. That was most remarkable given the total amount of her available screen time during the Chiefs' games was a mere 0.46 percent. Kelce's jersey sales spiked 400 percent overnight. Fast forward to the Super Bowl.

 

Thanks to Swift's participation, brand awareness received by the Superbowl was almost 10 times the exposure an advertiser received in a 30-second commercial. That was worth about $9,500,000 in free advertising for the game. At the same time, this year's Super Bowl viewership increased to 123.4 million viewers versus 115.1 million last year. But among women ages 18 to 24 viewership increased 24 percent from last year, according to Sports Media Watch.

 

Swiftonomics is the word most often used to describe the global impact of Taylor Swift. It is a phenomenon that is so novel that a University of Kansas professor has recently created a curriculum called "Swiftynomics 101" to study the economics of the 34-year-old pop star's effect on the NFL.

 

The media would have you believe that everything Taylor touches turns to gold. That may be true, but it is not luck or accident that makes it so. Yes, her bank account now totals more than $1.1 billion by most estimates. But she has earned every dime of it.

 

She has written and sung 250 songs, and 10 albums beginning at the ripe age of 16. It may be the reason she has almost 500 million followers on social media. Her Eras tour consisted of 66 concerts in 20 U.S. cities and four cities in Latin America. There are still another 85 concerts left to do. She sings 44 songs per concert no matter whether she is "sick, injured, heartbroken, uncomfortable or stressed," according to her Time interview. To say she works her tail off would be an understatement. Bloomberg estimates she pockets $13 million every night.

 

For millions of children and adults, it would be hard to imagine a better role model than Taylor Swift. As for her economic acumen, the Kansas teacher is on target. I wouldn't be surprised to hear that Harvard or MIT has a case study or two for their next semester with Swift in mind.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.