Macrosynthesis

TLDR

• Rising CPI/PPI complicates Federal Reserve decisions
  
• Trump Team Recommends Ending Crash Reports
• Google's Willow Chip Advances Quantum Computing
• Broadcom Gains 20% on AI Opportunities
• Adobe Shares Drop on Weak Guidance

‍

U.S. CPI and PPI Trends Show Persistent Inflation

In November 2024, the U.S. Consumer Price Index (CPI) rose by 0.3% month-over-month, in line with expectations, and climbed 2.7% year-over-year, reflecting the first consecutive annual acceleration since March. Shelter costs remained the largest contributor, accounting for nearly 40% of the CPI increase, though they showed signs of cooling. Food prices also surged, driven by higher costs for beef, pork, and eggs.

The Producer Price Index (PPI), measuring wholesale prices, increased by 0.4% monthly, exceeding forecasts, and by 3% annually, marking its highest growth rate in nearly two years. Rising costs for goods, including a sharp spike in egg prices due to avian flu, and fresh produce were key drivers.

These inflationary pressures indicate disinflation may have stalled, complicating the Federal Reserve's path to meeting its 2% target while cutting interest rates. Markets still anticipate a modest rate cut, but persistently high CPI and PPI readings highlight the challenges of balancing price stability with economic growth. Ironically, the higher the Fed rate, the higher the mortgage rate, the higher the shelter cost. The only ways out of high shelter costs are increasing supply, lowering demand, or lowering interest rates.

Rising CPI and PPI Cloud Fed Rate Cut Expectations

While markets anticipate a 25 basis point rate cut in December, the Federal Reserve faces mounting challenges in justifying this move. Policymakers must weigh the risk that persistent inflation, as signaled by rising CPI and PPI figures, could undermine long-term price stability.

Recent discussions within the Fed have highlighted diverging views on the pace of monetary easing. Some officials emphasize caution, suggesting that elevated inflation metrics may warrant maintaining tighter policy longer. Others argue that early rate cuts could mitigate economic strain, especially if labor market dynamics weaken or external shocks emerge.

Bitcoin ETFs About to Overtake Gold ETFs in AUM

Bitcoin exceeded $100,000 per coin last week, thanks in large part to President Trump confirming plans for a U.S. Bitcoin strategic reserve which has encouraged many to move their money into Bitcoin ETFs. Russia appears to be following suit with its own Bitcoin reserve, and the Bitcoin cold war could drive prices of the coin much higher. These Bitcoin ETFs now hold $100 billion in assets. Gold, an asset class represented by ETFs for 20-years, holds about $125 Billion in assets. It's likely Bitcoin will surpass Gold ETFs in AUM in 2025. The laser eyes have won.

ECB Cuts Rates Amid Growth Concerns

The European Central Bank lowered its deposit rate by 25 basis points to 3%, marking its fourth cut this year as economic risks mount. ECB President Christine Lagarde highlighted "abundant uncertainty" and a worsening growth outlook, driven by political instability and potential U.S. trade tensions. The move signals ongoing efforts to support the eurozone economy, with further easing possible in early 2025 as inflation approaches the 2% target. Markets anticipate additional rate cuts ahead.

EU Defense Budgets Rise Amid Anticipation of Trump's Return

European NATO members are intensifying discussions on increasing defense spending, with proposals to raise the alliance’s target to 3% of GDP by 2030. These talks, influenced by Donald Trump’s anticipated return to the U.S. presidency, reflect concerns over his past criticisms of NATO’s reliance on American military funding. Trump’s push for Europe to take greater responsibility for its defense has renewed urgency, compounded by Russia’s ongoing aggression in Ukraine.

Currently, 23 NATO members meet the existing 2% GDP spending target, up from just six in 2018. However, significant disparities remain, with countries like Italy and Spain still lagging. Proposals include an interim target of 2.5% by 2028, though fiscal constraints challenge many nations, including Germany and the UK.

For Europe, higher defense budgets aim to bolster NATO capabilities, modernize militaries, and signal strategic independence. However, such commitments would place additional strain on national budgets already stretched by economic uncertainties, raising questions about feasibility and long-term sustainability. NATO’s June summit will likely formalize these ambitious goals.

Unexplained Drone Sightings in U.S. Prompting Outrage, Concern

Unidentified drones have been sighted across New Jersey and nearby states, sparking public concern and federal investigations. While Rep. Jeff Van Drew claimed an Iranian "mothership" off the U.S. East Coast could be responsible, the Pentagon has dismissed these allegations, confirming no evidence that links the drones to Iran or any foreign adversary.

The drones, described as the size of cars, have hovered near critical infrastructure, prompting New Jersey officials to call for federal intervention. As investigations continue, Governor Phil Murphy and local leaders are urging enhanced nighttime drone restrictions and federal legislation to address the issue.

Consumer Discretionary Stocks Rise Heading Into Christmas Season

Last week, the S&P 500 sectors experienced widespread declines, with a few exceptions providing some positive momentum. Telecom led the way, gaining 2.4%, followed by Consumer Discretionary, which managed a solid 1.4% increase, indicating strength in select growth-oriented areas. However, most sectors were in the red, with Materials suffering the steepest loss at -2.9%, reflecting weakness in commodity-driven industries. Defensive sectors like Utilities and Healthcare also struggled, falling -2.7% and -2.4%, respectively, suggesting limited investor appetite for traditionally safer plays.

The Financials sector dropped -1.9%, while Industrials declined -2.3%, reflecting broader economic caution. Energy fell -2.1%, potentially driven by volatility in oil prices, and Real Estate mirrored these declines with a -2.4% drop, likely pressured by higher interest rates. Meanwhile, Information Technology remained relatively resilient, shedding only -0.2%, as investors seemed to maintain confidence in the sector's growth prospects. Lastly, Consumer Staples slipped by -0.7%, showing more modest losses compared to the broader market. Overall, last week was characterized by significant downward pressure across most sectors, with growth-focused areas like Telecom and Consumer Discretionary providing the only bright spots.

The Week Ahead

Key events include the Federal Reserve’s rate decision, U.S. retail sales, PCE prices, and GDP growth data. Globally, China releases industrial output and retail sales, while the UK, Japan, and several emerging markets announce monetary policy decisions. Canada and Germany report inflation and sentiment indicators, respectively.

‍

‍

Natural Gas

+7.89%  (1W Chg)

+8% (YoY Chg)

Gold

-1.25% (1D Chg)

+3.13% (1M Chg)

Cocoa

+17.09% (1M Chg)

+168.53% (YTD Chg)

Eggs

-10.72% (1M Chg)

+74.89% (YTD Chg)

‍

Company News

‍

Top LevelFields AI Alerts this Week

‍

This week, LevelFields AI alerts highlighted several notable market movements. FET surged 8.63% in a single day following the announcement of a $75 million stock buyback, a significant move given its $182 million market cap. Similarly, OLN jumped 8% after unveiling a $2 billion buyback program, nearly half of its $4.3 billion market cap. Meanwhile, MCRB saw a 6.5% one-day increase on the news of its breakthrough therapy designation, further demonstrating the impact of strategic announcements on market performance.

‍

Google's Willow Chip: Transforming Quantum Computing and Beyond

Google’s unveiling of its quantum processor, Willow, marks a pivotal moment in computing. Willow, equipped with 105 qubits, demonstrates exponential error reduction—a breakthrough overcoming a major bottleneck in quantum technology. The chip performed significantly better on benchmarks than Google’s 2019 Sycamore processor, solving complex problems beyond classical supercomputing capabilities.

Part of Google’s six-step strategy to develop quantum systems with practical applications, Willow is seen as a foundational step toward a machine with one million qubits. Potential applications include revolutionizing drug discovery, energy solutions, and materials science. Google CEO Sundar Pichai highlighted the chip’s role in bringing practical algorithms closer to reality.

The announcement boosted Alphabet’s shares by 6% and garnered praise from tech leaders like Elon Musk and Sam Altman. While full-scale utility remains years away, Willow solidifies Google’s leadership in the quantum race, positioning it to shape industries and unlock computational possibilities unimaginable with current technology.

Broadcom Soars on AI Chip Potential

Broadcom’s stock surged over 20% after announcing a significant opportunity in artificial intelligence during its earnings call. CEO Hock Tan projected AI chip revenue of $60–$90 billion over the next three years, driven by partnerships with three unnamed hyperscalers deploying its custom AI chips, XPUs. Broadcom revealed two additional hyperscaler customers in advanced development, reportedly including OpenAI and Apple. AI chip sales grew 150% year-over-year, reaching $3.7 billion, outpacing declines in its non-AI semiconductor business. With AI demand propelling growth, Broadcom's market cap surpassed $1 trillion, solidifying its position as a key player in the AI-driven semiconductor market.

Adobe Stock Drops After Disappointing Guidance

Adobe shares dropped 14%—their steepest decline since 2022—after issuing disappointing fiscal Q1 revenue guidance of $5.63–$5.68 billion, below analysts’ $5.73 billion expectations. Despite a strong Q4 performance with adjusted EPS of $4.81 beating estimates, concerns about 2024 growth weighed heavily. Analysts at TD Cowen downgraded the stock, citing challenges in Adobe’s monetization of generative AI, though Deutsche Bank maintained a buy rating with a lowered price target. With shares down 20% year-to-date, Adobe trails the Nasdaq’s 33% gain, raising questions about the company’s ability to meet long-term growth targets despite current AI initiatives like Firefly.

Trump Team Proposes Repeal of Crash Reporting Rule Backed by Tesla

The Trump transition team has recommended eliminating a federal rule requiring automakers to report crashes involving advanced driver-assistance systems, a regulation Tesla has criticized as burdensome. The rule has been instrumental in National Highway Traffic Safety Administration (NHTSA) investigations, particularly into Tesla’s Autopilot system, which accounts for a significant portion of reported incidents. Critics warn that removing the rule could hinder safety oversight, making it harder to identify crash trends. Proponents argue the regulation imposes excessive data requirements. The proposal aligns with Tesla CEO Elon Musk’s broader calls for regulatory simplification but raises concerns about balancing innovation with public safety. Tesla (TSLA) closed the week with a gain of over 9%, bringing its total increase to 40% over the past month.

‍

‍

The chart above shows the total returns of all premium alerts sent to Level 2 members that were closed since we launched the service. Level 2 members receive 1-2 alerts per week, selected by our analysts using a combination of AI, fundamental analysis, technical analysis, and macroeconomic analysis...so you don't have to.

‍

We're happy to share the trade log and a sample alert if you're interested in seeing it. Just enter your email at the bottom of this page to get a copy emailed to you directly.

‍

‍

This Level 2 Alert sent Dec 1st yielded a 40% profit in 11 days.

We've included the exact alert below FYU.

GRRR: Gorilla Technology Group

Trade: Equity, Long

Expected Hold Time: 3-6 Months

Risk: Med-High

Expected Returns: ~50%

Entry Price: $5.50-6.25

Best Exit: >$9 [or hold long-term]

Rational and Catalysts

• Gorilla Technology Group reported explosive growth in H1 2024, with revenue surging 222% year-over-year to $20.67 million, driven by strong demand for its AI-driven solutions. Gross profit rose 456% to $17.68 million, while the company achieved a net profit of $1.61 million, marking a major turnaround from a $7.27 million net loss in H1 2023. Operational efficiencies, including a 27.55% reduction in overhead costs, contributed to a positive EBITDA of $2.49 million, further highlighting Gorilla’s successful strategic realignment and focus on profitability.
• Gorilla Technology Group Inc. views its stock as significantly undervalued and has launched a $6 million share buyback program, repurchasing over 1.1 million shares to date. Backed by strong cash reserves exceeding $40 million, the initiative reflects management’s confidence in the company’s intrinsic value and growth potential. CEO Jay Chandan highlighted the buyback as a strategic move to address market misalignment, following impressive financial performance, including a 222% revenue increase in 2023.
• The company plans to continue buybacks while pursuing major contracts and global expansion.
• Leadership is forecasting $90 million in revenue and $15 million in EBIDTA for 2025. The current valuation is $67 million, so GRRR is trading at less than 1 X sales and at a really low 2025 p/e of 4.
• The market is beginning to catch on and the stock is starting to spike back towards a normal valuation level. It's very volatile so catching a pullback is preferred to chasing it, but the upside is worth the downside risk short term.
• The company says it has been the victim of market manipulation which has driven its share price down. This presents an opportunity to get into it with the caveat that continued manipulation could create odd fluctuations in the stock price.

‍

‍

• 3 Small Caps That Outperformed Nvidia This Year

• Tesla Fans Moving to Rivian

• Humanoid Robots Projected to be a $7 Trillion Market

‍

New Features

‍

Stock Price Alerts

You can now set custom price targets directly on company profile pages and receive instant notifications via email or text when your targets are reached. Stay informed and never miss an opportunity!

Paper Trading

In the watchlist, you can now simulate trades by setting a purchase price and the number of shares bought. Track your portfolio’s performance without risking real money and sharpen your investing skills. Use the cog icon on the right side of a watchlist row to add this information. Set columns by selecting the metrics on the left.

‍

Follow Us for Additional Daily Updates on Social Channels

‍

‍

‍

Upcoming Earnings

‍

TUESDAY

HEICO (HEI), Cal-Maine Foods (CALM)

‍

WEDNESDAY

General MIlls (GIS), Micron (MU)

‍

THURSDAY

Accenture (ACN), CarMax (KMX), PayChex
FedEx (FDX), Nike (NKE)

‍