💰 Inflation data is here

and Big Tech in trouble

Good morning investors! Yesterday was another mixed day with big names falling.

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Today we cover:

  • The latest inflation report

  • Big Tech continue to fall

  • More about the economy

📊 Economy and News 

Wholesale prices rose 0.2% in December, less than expected

Wholesale prices rose less than expected in December, signaling a potential easing of inflationary pressures. The producer price index (PPI) increased by 0.2% for the month, down from 0.4% in November and below the anticipated 0.4% forecast. The core PPI, which excludes volatile food and energy prices, remained flat against expectations of a 0.3% increase. When excluding food, energy, and trade services, the index edged up by just 0.1%.

Goods Prices Climb, Services Stay Flat

The annual PPI showed a 3.3% rise for 2024, a notable jump from 1.1% in 2023. Goods prices rose by 0.6%, driven by a 9.7% spike in gasoline prices. However, this was partially offset by a 14.7% decline in fresh and dry vegetable prices. On the services side, prices were unchanged, with a 7.2% rise in passenger transportation negated by falling prices in traveler accommodation.

This PPI release marks the first of two key inflation indicators this week, ahead of the more closely watched consumer price index (CPI) report.

Looking Ahead: Federal Reserve Policy

The Federal Reserve is expected to hold interest rates steady at its late January meeting, as markets largely anticipate minimal rate adjustments in 2025. While the PPI and CPI contribute to the inflation outlook, the Fed’s preferred gauge remains the personal consumption expenditures price index.

Policymakers, including Chair Jerome Powell, may use the upcoming meeting to outline future rate strategies, with one or two rate cuts potentially on the horizon.

Global hits:

Slower increase: The U.S. producer price index rose by 0.2% in December. This figure came in below both November’s 0.4% increase and the Dow Jones consensus estimate of 0.4%. For 2024, the annual headline producer price index showed a 3.3% increase, marking a notable rise compared to the 1.1% growth recorded in 2023.

Also check: The three-month fiscal year 2025 deficit rose to $710.9 billion, some $200 billion more than the comparable period in the prior year, or 39.4%.

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📈 Stocks

S&P 500 5,842.91 (+0.11%)
DJIA 42,518.28 (+0.52%)
NASDAQ 19,044.39 (-0.23%)
BRENT CRUDE 79.98 (-0.01%)
* Prices as of Jan 15th, 12:20 AM UTC

Big Tech is down again

Meta is set to cut about 5% of its workforce, focusing on the company’s lowest-performing workers.

CEO Mark Zuckerberg informed employees about the decision to move out low performers faster in a memo posted on the company’s internal Workplace forum on Tuesday.

Zuckerberg told employees 2025 will “be an intense year.”

The news report sent the stock down about -2%.

Unfortunately, tech continues to be in trouble. On Tuesday, the S&P 500 and the Dow Jones Industrial Average posted gains, while the Nasdaq Composite declined for the fifth consecutive day. However, some wealth managers are saying this could be a minor adjustment for the market rather than the start of a downturn.

All Magnificent Seven stocks fell, with Meta, Tesla and Nvidia registering the biggest losses, in that order.

We had news coming from other companies too, however. For example, in a bid to reduce expenses, Microsoft will pause hiring in part of its consulting unit, reduce travel expenses and cut marketing spending, according to an internal memo.

Shocking: Boeing delivered 30 airplanes in December (deliveries plunging 35% in 2024) but gap with Airbus widened in 2024.

Controversial: CFPB sues Capital One, alleges it misled consumers on savings rates. Elsewhere, Google faces first major probe under UK’s tough new antitrust rules. Also, Starbucks doesn’t want to be America’s public bathroom anymore.

Another cut: After Moderna, Eli Lilly has cut its 2024 revenue guidance, saying demand for its obesity and diabetes drugs had not met its lofty expectations. Eli Lilly expects about $3.5 billion in revenue for its diabetes treatment Mounjaro and $1.9 billion for its obesity drug Zepbound. CEO Dave Ricks told CNBC that the company has “tons of supply coming online” and that it will add more manufacturing capacity.

OMG: SEC sues Elon Musk, alleging failure to properly disclose Twitter ownership. Also, let’s not forget that the man is in the news for planning to buy TikTok.

Do you see Musk buying TikTok?

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💵 Personal Finance

Patience is an investing virtue

Episode 18 Patience GIF by Law & Order

Gif by nbclawandorder on Giphy

Investors who are patient and not emotional have the best returns. However, it’s not easy being patient, which is why so many people trade. It’s exciting but 95% of day traders lose money.

Sound investing is as exciting as watching paint dry, so here are 2 tips for how to be a more patient investor:

  • Focus on the long term. The stock market is volatile in the short term, but it has historically trended upwards over the long term. If you focus on the long term, you're less likely to be discouraged by short-term fluctuations.

  • Don't check your investments too often. It's tempting to check your investments every day, but this can lead to anxiety and impulsive decision-making. Instead, set a schedule for checking your investments, such as once a month or once a quarter.

To help you with this, here are some numbers:

  • Wait five years before selling a house: Five years is the average time it takes to recoup all the costs involved with buying a property and allow you the opportunity to profit. This, however, might not apply in some cases, i.e.: when you’re a flipper able to get houses at a cheaper rate and selling after performing renovations.

  • Keep stocks for at least 2 years: If you are serious about making money then consider keeping stocks for even longer. The best option is to set a price target and sell stocks only when you reach your target or when you are sure the price will move in the opposite direction.

The brain makes it hard to be patient. Most investors aren't patient. We want it quick but if you want to be a successful investor then you will need to learn to be patient.

💰 Be a Better Investor

“Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the models. Beware of geeks bearing formulas."

Warren Buffet

Resources:

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.