The stock market has been weak because 10-year Treasuries are at the highest yield in 16 years because inflation is slowing…wait, what? Meanwhile, I continue to like Meta Platforms (META), writes Michael Murphy, editor of New World Investor.
More about the slowing inflation below, but here’s the important point: When a stock or the market acts 180 degrees in reaction to news, either:
- The news was completely or even over-discounted, the classic “sell the news”
OR
- Wall Street pros are setting up yet another rug pull to extract the large sums of “their” money they believe we are wrongfully and temporarily holding.
This looks like the latter. The August Personal Consumption Expenditures Index – the Fed’s favorite inflation indicator, as they tell us over and over – was up 0.4% from August, a skotch less than the +0.5% expected but double the July-over-June increase.
But the core PCE was up only 0.1% month-over-month (MOM), the smallest monthly rise since November 2020, half of the +0.2% expected and July’s +0.2%. That monthly value is below the Fed’s 2% annualized target for the first time since the lockdowns.
On a year-over-year (YOY) basis, the headline PCE was up 3.5%, as expected. July was +3.4%. The YOY core was up 3.9%, as expected and well below August’s +4.3%. It was about the best inflation print ever, and under the hood it’s even better – it’s all in the right directions.
This month had zero inflation in core goods and further slowing in services, especially non-housing services, which is exactly the scenario the Fed wants to see. While I recognize that there’s a lot of volatility in non-housing services, the trend is good. Chairman Powell probably will think it’s worth pausing to see if the slowdown continues even as the labor market and growth continue to remain strong.
As for META, it released artificial intelligence chatbots with distinct personalities across its social-media apps to increase engagement with younger users. One, nicknamed “Bob the robot,” is a self-described sassmaster general with “superior intellect, sharp wit, and biting sarcasm.”
They also launched 28 more AIs in beta, with unique interests and personalities. Some are played by cultural icons and influencers, including Snoop Dogg, Tom Brady, Kendall Jenner, and Naomi Osaka. In addition, Meta has launched several Large Language Models such as AudioCraft for generating music from text prompts and an all-in-one multilingual AI translation model, SeamlessM4T.
Recommended Action: Buy META.
