Rate Cuts Matter Less Now

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JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, Rate Cuts Matter Less Now The Dow Jones and the S&P 500 both made new all-time highs yesterday, as investors kept the bullish sentiment going. Bulls are now coming out of the camp to proclaim a new rally ahead, including Brian Price at Commonwealth Financial. - “It’s almost like a fear of missing out,” said Brian Price, head of investment management at Commonwealth Financial. - “We had a little bit of volatility to start the year as investors maybe rebalance portfolios and look to realize some gains. But now, it just seems like we’re resuming the trend that was clearly in place” in the 4th quarter. However, the rally will likely depend on whether the Federal Reserve can bring inflation down to the 2% target without tipping the economy into a recession. Investors are betting on strong earnings growth, so that would require little to no recession in 2024. Traders now price in an about 40% chance of a rate cut in March – a big drop from nearly 81% last week. But it had little impact on stocks. Investors expect strong economic growth to make up for a smaller number of rate cuts this year. We will get a reading on the 4th quarter GDP on Thursday, while December’s PCE index (an inflation reading) will be out on Friday. - “Investor optimism had been driven by the belief there would be aggressive rate cuts by the Fed,” said David Donabedian, chief investment officer of CIBC Private Wealth. “Now investor belief has pivoted to view the economy as bullet-proof. No matter how high interest rates go, the economy will continue to glide right through.” David Donabedian, chief investment officer of CIBC Private Wealth (Photo: Bloomberg) Yung-Yu Ma at BMO Wealth Management also agreed by saying that it would be “favorable” for stocks if there are growth acceleration and lower inflation by the end of 2024. - “We believe the Fed will cut rates just three or four times in 2024,” he noted. - “Ultimately, the short-term interest rate trajectory continuing to point downward is more important than how many cuts take place in 2024 versus what gets pushed out into 2025. If the end of 2024 sees both growth acceleration and continued low inflation, that will set up an especially favorable backdrop for stocks.” Besides economic data, we will also receive earnings results from Netflix, Tesla and Intel. They will be critical for investors to analyze whether Big Tech can maintain its earnings growth rate. Don’t expect many surprises on the results, but forward guidance will carry heavier weights. An Unique Way To Bet On Carbon Neutral Era Today’s Stock Pick: Interface, Inc ([TILE]( You may have walked on Interface’s products without realizing it. The company invented the modular carpet tile, which is popular in offices. What makes carpet tiles unique? Carpets are divided into tiles, rather than a roll of carpet that covers the entire floor. What if you spilled coffee on the floor? The stain may make the work environment feel sloppier. The solution is easy. You only need to replace that specific tile. No need to remove the entire floor. Technicians can also lift tiles if they need access to underfloor cables. Lastly, carpet tiles offer greater design flexibility at lower costs. With a full-floor carpet, you must create a perfect design on one sheet of carpet. One mistake means doing it all over with a new roll of carpets. With modular tiles, you can refine the design tile by tile. Interface owns this segment in the global commercial flooring industry. Carbon-negative carpet tiles: Global companies are serious about achieving carbon-neutral, so they’re specifically looking for environmentally-friendly products. Interface is the only manufacturer that offers carbon-negative carpet tiles, measured cradle-to-gate without relying on any offsets. That will bring an important competitive advantage for Interface to win orders from corporate clients. (Source: Interface) Growth plans: Interface is considered the undisputed market leader in modular carpet tiles, and it is still in the early innings of becoming a leader in the tile market. Its current niche in carpet tile is worth $5 billion. It entered the high-growth, $3.3 billion LVT segment in 2017. LVT is the fastest-growing and offers the highest margin in the commercial flooring industry. So, the segment is a massive growth opportunity for Interface. Interface is also getting into the rubber flooring business (worth $1 billion) by acquiring the segment leader nora. In the graph below, you will see Interface’s new segments (in red colors) which offers the greatest growth and margin opportunities: (Source: Interface) All in all, the company’s served market doubled from ~$4.2 billion to over $9 billion today… in just a couple of years. New market segments: With a more diversified product portfolio, Interface can enter new, lucrative segments that expand outside the office market and into healthcare, education, multifamily, and transportation. A growth story: The company hasn’t fully recovered from the pandemic because of its focus on the office market. Obviously, not everybody is back in the office with more companies embracing hybrids. Will it ever recover? We don’t know. But revenue shows promising results, despite the office vacancy rate being at an elevated level. Prior to the pandemic, Interface was a growth story. You can see the company getting back on the growth track in 2021: (Source: Interface) Bottom line: Interface is a high-margin business that has plenty of growth space. It operates in only three categories of the commercial flooring industry. As soon as it hits market saturation, it can enter a new category. So, you can truly buy and keep this stock for decades. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](