A Sugar AI High Shrugs Off Bad Market News

Peter's Market Rap for the Week Ending 1.12.24

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A Sugar AI High Shrugs Off Bad Market News

It seems like nothing can stop the current upward movement of the S&P 500, not even bad news on the inflation, unemployment, and geopolitical fronts as the market finished slightly up for the week.  I continue to believe that it is the secular bullish trend for artificial intelligence in particular and tech in general that is disguising what is otherwise growing rot in the rest of the American economy.

Remember here that the ISM manufacturing index had been below 50, and therefore signaling a recession in manufacturing, for an astonishing 14 months. 

Meanwhile, America’s mega-billionaires in the likes of Musk and Zuckerberg et al are racing forward with AI investments that will eventually wipe out large swaths of the American labor market and no doubt be used in a coming war of the machines – life imitates science fiction.

On that note, 2024 started off with yet more layoffs – Google and Amazon at the top line with Citigroup eliminating fully 10% of its workforce – some 20,000 Groupies to hit the bricks.  Inquiring minds want to know how much of this is AI-driven or recession driven.  More about this in a separate column.

On the bad inflation news front, Thursday’s Consumer Price Index report came in hotter than expected, with the 12-month CPI rising 3.1 to 3.4 percent – at least the core rate dropped from 4.0 to 3.9 percent.

The big question remains as to whether the Fed’s war on America’s blue collar workers through higher interest rates succeeds in holding down wage increases and short-circuiting a possible wage-price spiral that I have been warning against.

And don’t look for interest rates to move South anytime soon as the increasing size of the Treasury auctions to fund our burgeoning deficit continue to push upward and north on yields across the curve.  High for longer is the Dennis Gartman mantra given the inflation printouts and the Treasury’s gourmand appetite for new funding.

Meanwhile, on the geopolitical front, we continue to slip down the slippery slope of yet another endless war in the Middle East, this time with an Iran backed by Communist China, Russia, and North Korea.  As the Secretary of Defense hides out in a hospital bunker, the Bidenites have joined forces with the Brits to bomb the Iran-proxy Houthi rebels to deter them from lobbing their own missiles into oil tankers in the Red Sea and conducting pirate operations.

So we have a Iran proxy in the Houthis and a Russia-China proxy in Iran dragging America into a war that will allow the Russians to consolidate their gains in Ukraine and open the door to a Chinese invasion of Taiwan.  Did I mention that every time Joe Biden fires another missile or ships a weapon to Ukraine, we get closer to running America’s arsenal of democracy down to the zero line.  Yes, elections do indeed have consequences.

I continue to refuse to buy into the notion that this bull can last much longer.  Cash remains king (parked in high yielding instruments) and risk remains to the downside.

Peter Navarro.  Out.