Today's 'Good' Inflation News

Wall Street cheers the latest inflation data... Almost everything was up... What's next for cryptos... News from both sides of the White House transition... The AI boom gets another boost... An energy opportunity...

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The inflation news was 'good' again...

Before the markets opened today, Uncle Sam released its December consumer price index ("CPI") numbers.

On the surface, they weren't great, showing month-over-month growth of 0.4% and 2.9% compared with a year ago. That's well above pace for the Federal Reserve's 2% annual target, and 40% of the rise was attributed to higher energy prices. Food costs rose, too.

But Wall Street cheered the report because "core" CPI – which strips out energy and food prices for "volatility" reasons – grew by "only" 0.2% for the month and 3.2% year over year.

This is the knee-jerk nature of markets. The numbers aren't great for Main Street, but the readings are slightly less than Wall Street expectations. That was good enough news to send the major U.S. stock indexes higher.

The benchmark S&P 500 Index closed roughly 2% higher today, as did the Dow Jones Industrial Average and Russell 2000 Index. The tech-heavy Nasdaq Composite Index led, up 2.4%.

This reaction was much like yesterday's...

As I (Corey McLaughlin) wrote yesterday, markets were higher after "better than expected" inflation numbers in the December producer price index. Today's move was even better.

Based on last Friday's jobs data and this week's inflation reports, federal-funds futures traders have bumped up their expectations for another rate cut to come in June. These reports will be the last major ones until the Fed's next meeting later this month. That's also when Fed Chair Jerome Powell will share his outlook on the economy.

I think it's a stretch to have much conviction about what's going to happen half a year from now (especially based on a pair of December inflation reports). But as I've said before, the market doesn't care what I think.

However, I am confident about one thing... The gyrations we've seen so far this year in the market's expectations around potential Fed policy are a clue that we may see heightened volatility this year (for inflation reasons alone).

We pondered earlier this week if the recent move in high(er) inflation expectations was overcooked. A pair of inflation reports perceived as decent appear to have confirmed that, as stocks and bonds both moved higher in response.

I suspect we could see overreactions in both "good" and "bad" directions around each month of inflation data this year. Because it looks like the path of inflation has displaced the labor market as the dominant market question for many investors again.

It was an 'almost everything was up' day...

Stocks rose in the U.S. and major foreign and emerging-market indexes. U.S. bond prices also rose (while yields retreated). The 10-year Treasury yield fell more than 10 basis points to less than 4.7%. Oil prices were up more than 3%.

All the 11 major sectors of the S&P 500 were higher, except for consumer staples, which is considered a "defensive" area. A strong start to U.S. earnings season from the big banks also helped, with financials up almost 3%. We'll have more on earnings in tomorrow's edition.

Meanwhile, bitcoin – the world's most popular cryptocurrency, which has been enduring a bumpy ride of late after enjoying a postelection spike – hit $100,000 again after briefly falling to around $90,000 earlier this week.

Could it be the start of another leg higher for bitcoin?...

We hesitate to make a short-term prediction given the volatility, but if you ask our Crypto Capital editor Eric Wade, he'll tell you the entire crypto market could see much higher prices after January 20, when President-elect Donald Trump is inaugurated to a second term in the White House.

We've written about this story before. As Eric says, "Donald Trump is probably the single most bullish development for the crypto market, ever." Eric is now explaining more in a brand-new presentation. As he says...

Trump is widely expected to tear down regulations holding back the largest financial institutions from fully embracing bitcoin.

I predict he will quickly move to level the playing field by removing "geo-fencing" that prevents Americans from touching many crypto assets available elsewhere...

Most importantly, he plans to establish a Strategic Bitcoin Reserve – a development so bullish it's caused many experts to dramatically revise their bitcoin price targets considerably higher.

For these and other reasons, Eric says right now might be the last great opportunity to be "early" in owning crypto.

This time last year, Eric was saying bitcoin could reach $100,000 by the end of 2024, which it did. Eric has recommended so many big crypto winners that we had to create a separate "Hall of Fame" list for him at the bottom of every Digest e-mail.

Eric understands cryptos are still "new" to a lot of people, so in his terrific Crypto Capital service, he like provides step-by-step guidance on how to buy your first bitcoin and special reports to get you started with buying his recommendations.

Click here to listen to what Eric is saying about bitcoin and the entire world of cryptos right now, including why he's bullish on one lesser-known "altcoin" that he says could deliver gains as high as 384X.

This sort of number may not often ring true. But Eric has the most successful track record of anyone at Stansberry Research over the past five years and has countless 1,000% returns. So this sort of life-changing prediction is worth listening to.

Switching gears...

The outgoing resident of the White House is making news...

It's a big story and good news. But we're not talking about today's reported ceasefire and hostage deal between Hamas and Israel, which comes in the final days of the Joe Biden administration, though it was reportedly developed at the behest of Trump.

Instead, I'm talking about what President Biden did yesterday when he issued an executive order that could have a long-term impact on the U.S. economy... big tech... and certain energy companies.

In short, Biden cleared the path to make it easier for companies to build artificial-intelligence ("AI") data centers by opening up federally owned sites for data-center construction. From the order...

Building AI in the United States will help prevent adversaries from gaining access to, and using, powerful future systems to the detriment of our military and national security. It will also enable the United States Government to continue harnessing AI in service of national-security missions while preventing the United States from becoming dependent on other countries' infrastructure to develop and operate powerful AI tools.

This comes not long after Trump announced $20 billion in foreign investment to build data centers in the U.S., with more potentially on the way. So investments here have bipartisan support.

And the AI infrastructure boom is already underway...

According to commercial construction research firm Dodge Construction Network, 78 data-center projects began construction in the first six months of 2024, totaling more than $9 billion.

That's triple the data-center construction spend from the first six months of 2021. And it includes the largest single data-center project Dodge Construction has ever tracked, going back to 1967 – the New Albany 1 and 2 project in Ohio.

Now the government is offering a helping hand to boost construction even further. It's going to do it fast, too. The order directs the Department of Defense and Department of Energy to, by the end of February, select at least three federal lands where the private sector can build these data centers.

But the green light and incentive for building data centers is only part of the battle.

As we've covered before, data centers need huge amounts of power. Right now, data centers use between 1% and 2% of the overall power generated worldwide. By the end of the decade, Goldman Sachs predicts that will double to as much as 4%.

That brings us to the second part of the executive order...

Not only does the order provide federal land for data centers – it also provides it for construction of "clean energy" facilities to power the centers. That includes the typical clean-energy sources like wind and solar, as well as geothermal (using heat from the earth's core).

But there's a much more reliable clean-energy source – nuclear power – that could become more widely used as well. Our colleague and Commodity Supercycles editor Whitney Tilson and his team have been covering this trend for a while.

The nuclear option...

Last May, Whitney and the team unveiled their top nuclear-power stocks.

And in their latest issue from earlier this week, they explained why nuclear is going to be a larger part of U.S. energy moving forward (hint: data centers). As the Commodity Supercycles team wrote...

Nuclear energy is clean. And, more importantly, it's capable of supplying stable power to the grid. That aligns with the 24-hours-a-day, every-day-of-the-year environment that data centers have to operate in.

Nuclear is already the leading clean-energy source across the globe. Nuclear made up 18.6% of total power generation in 2023, versus 14.1% for solar and wind combined. And big tech companies – like Amazon, Microsoft, Alphabet, and Meta Platforms – have been locking up nuclear power for their own data centers.

So there's more than one way to play the trend of companies – and now the government – heavily investing in AI.

If you haven't caught the latest Commodity Supercycles issue, published on Monday, which includes a full breakdown of the portfolio, subscribers and Alliance members can check it out right here.

And speaking of the AI trend...

Tomorrow, a group of Stansberry Research editors and colleagues are gathering to have a private, wide-ranging discussion about AI and the various investment opportunities linked to the technology.

Data center and AI infrastructure buildout was a big part of the discussion we had in a meeting like this last year. I also expect the discussion to include things to be wary of in this boom, or bubble, depending on the view. Stay tuned to this space for more soon.

New 52-week highs (as of 1/14/25): Altius Minerals (ALS.TO), Antero Resources (AR), Alpha Architect 1-3 Month Box Fund (BOXX), Coterra Energy (CTRA), EQT (EQT), GEO Group (GEO), Kinder Morgan (KMI), Cheniere Energy (LNG), Plains All American Pipeline (PAA), Planet Fitness (PLNT), and Vistra (VST).

In today's mailbag, a clarification about a note in Monday's mailbag... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"The dollar, according to your subscriber's letter, is worth 0.04% compared to the 1966 dollar. Got to put the decimal in the correct place. 2450/60000 =.04. That is 4%, not 0.04%. But it's still not a good sign!" – Subscriber Bernard B.

All the best,

Corey McLaughlin and Nick Koziol
Baltimore, Maryland
January 15, 2025