VIDEO: Here's Our Up-to-Date Shopping List Following the March CPI Report

In today’s Daily Rundown video, Chris Versace recaps the March CPI report, the portfolio’s current shopping list, and why we will likely stay on the sidelines at least until tomorrow’s March PPI report is published. 

He also reviews Taiwan Semiconductor’s TSM March-quarter revenue and why it’s a positive data point for several portfolio holdings. 

Transcript

CHRIS VERSACE: Hey, folks. It is Wednesday, April 10. Chris Versace here. And the market is trading off following the March CPI report that, yes, came in hotter than expected both for headline inflation as well as the closely followed core CPI report. Look, are we surprised by the market's reaction? No, we're not. Actually, we were anticipating it. As you well know, we were concerned that based on the preponderance of data

So far in March, whether it was the PMI reports, ADP's employment report that showed job changer wages actually accelerated during the month, second consecutive month for that, or what we saw in the employment report for March in terms of average hourly wages on a year over year basis. And there were some others as well, not to mention the move higher that we've seen in commodity prices, particularly oil and gas. So again, not really sure what a lot of folks were thinking that the March CPI would actually improve slightly both on a year over year and month over month over month basis. Clearly, that's not what we were thinking, not what we saw.

And as a result, we're seeing the market coming around to realizing that, yes, inflation progress, particularly for core CPI, has stalled out between 3.8% and 4.0% over the last six months. Without a doubt, we're going to hear the Fed heads, as they make their next round, saying, man, not the good data we were looking for. It looks like rates might have to be higher for longer. Remember we've started to see some Fed officials really start to signal that. I think we're going to see even more. And that is, of course, going to weigh on the market's expectations for rate cuts.

You know, our view is more likely two, more likely even one, perhaps late this year, based on what we've seen thus far, but as you know we will continue to update our thinking as more data becomes available because we, it seems unlike the market, like to let the data talk to us. And that means that we will also be paying close attention to tomorrow's March TPI report, which is expected to tick higher both on a year over year and month over month basis compared to February.

As we think about this and we look at the movement we've seen in a number of commodities, again including oil and gas, it stands to reason that we should see some higher rate of PPI headline and core in the March data. The big question is going to be does it come in even hotter than expected. That's what we'll be looking to see. And based on that, we'll start to find out if the market is going to find its footing or if expectations for rate cuts have to move out even further.

So today, while it might be tempting to put some cash to work, we're actually going to wait at least another day until we have a clearer picture because, remember, PPI tends to lead CPI. So we're going to want to get all this data kind of baked in if you will and make a rational informed decision before we do anything deploying capital in the portfolio.

Now let's talk about some positive news, shall we? We did say that we were going to be waiting for Taiwan Semiconductor to report its March revenue. And it did. And when we aggregate that and take a look at the entire March quarter, well, good news. It was up about 16 and 1/2% percent year over year ahead of what the market consensus was looking for.

Again, that's March quarter revenue for Taiwan Semiconductor. And we know that the two key end markets for Taiwan Semiconductor, the largest high performance computing which is, of course, AI and data center. Those numbers obviously reflect strong demand. They are positive for our shares of Nvidia, positive for our shares of Marvell as well.

But the second largest end market for Taiwan Semiconductor is smartphone. Typically, the March quarter is the seasonally weakest that we see for smartphone demand. We've talked about this. We do expect that we will see a improving demand profile as AI on device, including smartphones, starts to hit the markets, particularly in the second half of the year. But when Taiwan Semiconductor reports its quarterly results, we will have a clearer picture on the demand profile for the March quarter between high performance computing, smartphone, and some of its smaller end markets.

Potentially, we could see smart phone holding up a little better than the market was expecting. That would be a positive for not only our shares of Apple but also Qualcomm as well. The data based on what we've seen, the initial read says that there's probably a little more upside for our Qualcomm price target but we want to confirm that when Taiwan Semiconductor reports.

So as we kind of leave it there for today, we are going to again kind of sit on the sidelines until we get that March PPI report. We have our shopping list. We are watching levels. And just to remind folks, we would love to pick up more shares of Applied Materials, Universal Display, Waste Management, Nvidia, potentially PepsiCo as well if they can hold their footing at these key technical support levels. So that's what we'll be watching today and making some assessments tomorrow as well.

And remember too that we are also keeping a close eye on our inverse ETFs and their RSI levels. Should they pass through the 50 levels, that could be an area where we start to take them off. But again, I think we're going to want to wait until we get the March PPI report before we make any of those decisions. That's today's video, folks. Thanks for watching. Please be sure to check your emails. Check your inboxes. We want to make sure you're getting our latest thoughts and any portfolio actions should we make them. Thanks for watching.