What to know today

  • Markets reflect uncertainty. 
  • How about a 32-hour work week?
  • On Nvidia’s pull…

The Thing About This Wednesday

Traders are pricing in a 2 percent chance our central bankers will announce a rate cut following this week’s Federal Open Market Committee meeting.

That’s slim-to-none territory, and slim is fading fast.

Rate-cut fever has been fading for most of the year in fact, with expectations for a total upwards of six or seven to somewhere in the two-to-three neighborhood today.

In December, the Fed’s “dot plot” forecast a 2.5 percentage point reduction in the federal funds target range by the end of 2026. That would take the range from 5.25 percent to 5.50 percent to 2.75 percent to 3.00 percent.

Fed funds futures traders now see a 40 percent chance the Fed will hold steady in June too, up from 34.8 percent the day before February Producer Price Index data came in hotter than expected and from 25.8 percent on March 7.

Futures still reflect a 67.5 percent probability of at least three 25-basis-point cuts by December. On March 7 traders were pricing in 56 percent probability of at least four cuts.

That’s what the CME FedWatch Tool says.

The market is still pricing in rate cuts for 2024. But still generally rising consumer- and producer-level prices have complicated the timing.

And there’s some emerging softness in the labor market to consider too, in addition to a rising narrative about the impact of debt-service costs on consumer sentiment.

The thing to note is that the Fed is no longer fighting inflation. The thing to bookmark for future reference is the potential for stagflation.

With market rates trending higher for most of the year, some of the Fed’s work is being done for it, with difficult-to-account-for consequences in the real economy.

Price action on Friday reflected some of the angsty uncertainty we’ve been pushing upward against for quite some time now, with all three major equity indexes sagging and the yield on the 10-year US Treasury note spiking.

Let’s start the week with a positive point, though: As Ryan Detrick of The Carson Group noted in a post on X on Friday, March 13 was the 50th trading day of the year.

At that point, the S&P 500 was up 8.3 percent year to date. When the S&P 500 is up more than 5 percent year to date on day 50, the rest of the year has been higher 24 out of 25 times.

Setting aside the fact that the outlier was 1987, this is really good stuff.

deep dive

Is This the Future of Work?

Bernie Sanders has his own cut in mind.

Self-described democratic socialist Sen. Bernie Sanders of Vermont has introduced legislation that would establish a 32-hour work week as the national standard.

Sanders’s bill is based on the premise that the rapid advancement in artificial intelligence and automation should benefit the working class.

And it has some surprisingly capitalistic underpinnings, including expressions of general conceptual support from titans of banking like Jamie Dimon and the information age like Bill Gates.

Sander van 't Noordende, the CEO of human resources consulting firm Randstad, said at the World Economic Forum’s annual meeting in January 2023 that the four-day working week was “a business imperative.”

Work in the field suggests universal benefits as well. Of the 61 organizations that took part in a 2022 UK four-day week pilot in the United Kingdom, at least 54 confirmed they were still operating the policy one year later. And at least 31 made the four-day week permanent.

One hundred percent of managers and CEOs said the policy had a “positive” or “very positive” impact on their organization, across staff well-being, turnover, and recruitment.

According to Boston College sociologist Juliet Schor, follow-up surveys show that improvements have sustained, with workers reporting higher job satisfaction.

Schor’s research found that companies have decreased or cut activities with questionable or low value in the day-in, week-out operation, replacing  meetings with phone calls, messaging apps, and other means of communication.

Four-day week employees also use their third day off for doctor’s appointments or other personal errands they’d otherwise squeeze into a workday.

Employees are also pursuing hobbies, tending to personal care, and doing other things to boost their mental and physical health with their extra day.

deep dive |
March 18, 2024

Is This the Future of Work?

Information Technology

$NVDA Is the Center of Everything Right Now

It’s introducing a new chip today.

As hard as it is to believe, given the attention paid to stories like the Magnificent Seven, 145 stocks in the S&P 500 generated total returns of greater than 25 percent in 2023.

But Nvidia $NVDA has all the gravity, not just in financial markets but apparently in the public policy arena as well.

Artificial intelligence is taking over everything and everywhere.

Take a look at the incredible things happening around Nvidia.

This is a chart showing the fund flows into the GraniteShares 2x Long NVDA Daily ETF $NVDL, as shared by Jim Bianco of Bianco Research on X on March 10.

NVDL is basically a leveraged single-stock exchange-traded fund that owns eight NVDA derivatives designed to generate a return equal to 200 percent of NVDA.

As Jim’s chart shows, no net new money flowed into NVDL from August 2023 to the end of January 2024. Since then, nearly $600 million piled in, and it now has total assets north of $1.3 billion.

Trading volume topped $2.2 billion on Friday, March 8, with total turnover of $102 billion 10 times more than all spot Bitcoin ETFs combined.

As of Friday’s close, NVDL is up 165.7 percent so far this year, the underlying stock 77.4 percent. NVDA’s market cap was $2.161 trillion, trailing only Microsoft $MSFT ($3.094 trillion) and Apple ($2.665 trillion) among US publicly traded companies.

NVDA will open its annual developer conference today in San Jose, hosting an in-person as well as a virtual event for the first time since the COVID-19 pandemic. The chipmaker expects 16,000 in-person attendees, up from about 8,000 in 2019.

Management will introduce its next-generation B100 chip, which is likely to cost well more than $20,000 and will be the key driver of future earnings.

Analysts expect a lot of NVDA, with a consensus forecast for 81 percent top-line growth this year.

The stock’s price-to-earnings ratio actually peaked a year ago but has come down even as the price has soared because estimates on the earnings side keep going up too.

The big worry is whether these big numbers can continue. We’ll see how far the B100 and other new products can extend NVDA’s runway.

past issues

read more from our daily investor newsletter