My investing muse - CPI, bank and AI

My investing muse - CPI, bank and AI

The earnings of the Big 3 banks (JP Morgan, Citibank & Wells Fargo) came out to be better than expected. It gave a strong start to the earnings season. However, the Big 3 banks have benefited as consumers moved their deposits out of smaller/regional banks. Most of these have ended up with the Big 4 (including Bank of America). The banking crisis is yet over. With the latest interest rate hike, the banking sector would have incurred more unrealized losses to their long-term assets like bonds and treasuries. Though these could be held on till maturity but these would also be one of the first assets to be liquidated in event of a bank run.

CPI came out to be much lesser than anticipated. The market breathed a sigh of relief with YoY falling from 6.0% last month to the latest 5.0%. This is a significant drop in terms of inflation. The market is guessing that the Fed may take a “less hawkish” approach especially when the initial jobless claims rise. However, we need to understand that 5.0% YoY inflation remains a long way from the target of 2.0%. Thus, the Fed may still remain hawkish till the job is done.

AI remains a hot topic as more look to this to improve their productivity while reducing their costs. Beyond just business matters, it is needful for us to look at aspects concerning ethics, fair competition, content ownership and integrity. The progress made by AI is astounding in some sectors and this could lead to even more retrenchment along the way.

Conclusion

We have some good news and the technicals are showing a potential market rally in this coming week. As more earnings are reported, let us take note of the outlook too as this would way on the market sentiments and the stock prices.

With more warning about a coming recession, it is time for us to review our portfolio. Maybe we should cut some losses from stocks that are losing value and consider some hedging strategy as we prepare for more challenging days ahead.

@TigerStars

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