Economic Outlook2.0
US? Canada? Nvidia?
REPORT
Today at 20.00 CET, we expect the release of the FOMC minutes, which are a detailed record on the US Federal Reserve's positioning in terms of interest rates.
We must remember that this report is written 3 weeks before it is published. This does not preclude the possibility of any surprises, which could lead to greater volatility in the market than what is already expected. In any case, we do not expect any major changes in the speech, the possible rate cut in March is practically totally ruled out.
Rather, let's see what investors' expectations are for May and June.
U.S.
Target rate probabilities for June (2)
Target rate probabilities for May (1)
As can be seen in the charts, the expectations for May continue to make it more likely that interest rates will remain unchanged.
In June, on the other hand, is when we see that expectations point to a much more likely first-rate cut.
Conclusion:
As mentioned in previous editions, at the beginning of the year an almost imminent change of course in monetary policy was expected, but now expectations are starting to delay this possible event. This is likely to have been triggered by higher inflation data and the apparent strong resilience of US employment.
In simple terms, it is not necessary to lower rates, and thus the ease of credit, to activate the economy.
CANADA
The data has been cooler than expected. This, following the same logic as with the US situation, suggests that a rate hike may come sooner rather than later.
This is by no means a certainty, it is simply what the market is now discounting, that is a weaker Canadian dollar.
Here is a chart of the US dollar in relation to the Canadian dollar.
Regarding the Canadian situation, inflation data were released today and are as follows:
Usd/Cad 1hour chart
Conclusion:
From now on we could consider trading forex pairs against the Canadian dollar with a short bias towards this last one.
NVIDIA
NVIDIA Corporation Common Stock is expected to report earnings today (21/02/2024) after market close. That is at 22.00 CET.
We all know what a colossus this company is.
In the last year it has risen 230% and since the beginning of the year it has already risen 40%. These figures are incredible, and nobody doubts anymore that NVIDIA is one of the greats. However, the expectations of investors and analysts are becoming more and more difficult to meet, and there will surely come a time when they will not be met.
As far as earnings are concerned, some kind of slight accounting manipulation may occur in order to adjust some accounts to suit the publication of the results. In this regard, let's talk about the “Beneish M score”.
“This is a mathematical model that uses eight financial ratios weighted by coefficients to identify whether a company has manipulated its profits. It was created by Professor Messod Beneish who published a paper in June 1999 called The Detection of Earnings Manipulation.” (3)
Here we can see Nvidia’s Beneish M score:
Nvidia’s Beneish M-score(4)
The latest reports may indicate a slight hesitation in these results, perhaps to meet the high expectations...?
It is also worth remembering that Nvidia had to face the SEC back in 2003 which determined that a situation of manipulation of its accounts had occurred. Here is the document:
SEC report (5)
Conclusion:
There is no clear evidence that any kind of manipulation of NVIDIA's accounts is taking place, but that does not mean that this new variable is not a point to be watched and taken into account.