Welcome to BRC’s Breakdown.

Short and sweet. That’s how last week was for the Indian and US markets. India’s trading week was shortened to just two days with a holiday at each end. Whereas, US equities stayed strong, with the S&P500 and the smaller Russell 3000 index posting strong YTD gains.

First, let’s see how the markets fared this week:

Here’s a preview of what we’ll cover:

• Macro: Equities Rise Globally, Big Tech Earnings Report, India’s Budget

• Around The World: US To Grow Slow, Oil Prices Up, HDFC Banks Woes

• Crypto: Tesla's Bitcoin Journey - A $300 Million What-If Story!

• AI: Zuckerberg Aims for Open-Source Superintelligence

Equities Rise Globally, Upcoming Big Tech’s Earnings Reports and India’s Budget

The US equity market hit new highs, but tech stocks dominated the rally. The S&P 500 has risen for 12 out of the last 13 weeks. Nasdaq100, while higher, is still 3.7% below the historic high of November 2021.

While large tech stocks have driven the rally, shares of small-cap US companies (as tracked by Russell 2000) have not participated in the rally.

This is in marked contrast to India, where small & mid caps continue outperforming large caps. Small caps in India are 1.8% lower than their all-time high. Nifty 50 has declined 3.5% from the highs, but is fairly even on a YTD basis despite heavy selling over the past two weeks.

Last week, two key data points supported the case for a soft landing in the U.S with lower inflation:

• US Fed’s preferred inflation metric viz Core PCE came in at 2.9%, in line with expectations, indicating that inflation was back in a comfortable range. It is the first time since 2021 that Core PCE is lower than 3%.

• Fourth-quarter GDP growth exceeded forecasts, coming in at 3.3% annualized, versus expectations of 2.0% growth.

This "Goldilocks" outcome of better-than-expected growth, coupled with easing inflation, helped push the S&P 500 to new all-time highs, while the 2-year US Treasury yield, moved lower to around 4.35%.

Upcoming this week:

• January 30 to 31: The US Federal Reserve meeting is likely to keep the Fed Fund rates unchanged. The market expects the Fed to cut rates by 25 basis points in March – May.

• January 30 to February 1: Between Tuesday and Thursday, five Big Tech companies will report earnings: – Microsoft, Alphabet, Meta Platforms, Amazon, and Apple.

• February 1: The Indian budget will be presented on February 1. Since this is an interim budget ahead of national elections expected in April, markets are not looking for significant shifts in policy decisions. The projected fiscal deficit and any adjustments to oil tariffs that change fuel pump prices will be watched.

US’ Slow Growth, Oil Prices On The Rise, HDFC Banks Woes

Economists expect US growth to be weak in Q1 and Q2 before reaccelerating as the benefit of easier financial conditions i.e., lower interest rates, trickles down to consumers.

Geopolitics represents a key risk to this outlook that the US economy (and hence to an extent the global economy) will avoid a sharp slowdown. Freight prices (Containers and bulk) have surged with ships avoiding the Red Sea. Oil prices have risen almost 10% YTD & between an increase in energy & freight costs, sentiment could worsen quickly.

In India, banks continued to underperform led by HDFC Bank. Earnings season will now intensify with a raft of companies reporting this week. A few companies worth tracking are:

• ITC and Marico: Looking for improving consumer demand for essentials

• Lodha: View on real estate demand for 2024

• Zee Entertainment: Update on the Sony-Zee merger

Tesla's Bitcoin Journey - A $300 Million What-If Story!

Remember the buzz when Tesla bought mountains of Bitcoin?

Back in February 2021, Tesla made headlines with a big $1.5 billion investment in Bitcoin when its price was around $36,000. Fast forward to today, and the electric vehicle giant has liquidated 70% of its Bitcoin portfolio, missing out on a staggering $300 million in potential profits.

Since Tesla's first reported BTC balance in February 2021, the stock price has dipped around 40% against Bitcoin. Surprisingly, despite the fluctuations, Tesla sold about 10% of its holdings in March 2021 and a whopping 75% in Q2 2022.

According to Elon Musk, Tesla sold to boost cash flow during shaky times. But guess what? The company's doing better, and Bitcoin's on the rise again! So, was it a hasty decision?

What do you think? Should Tesla have held onto their Bitcoin?

Zuckerberg Aims To Open-Source Superintelligence

Remember Skynet from Terminator? Forget the killer robots – Mark Zuckerberg just dropped a bombshell announcement about building artificial general intelligence (AGI), and not just any AGI, but open-source AGI!

This means Meta, the tech giant behind Facebook and Instagram, is pouring billions into creating an AI as smart as humans, and then sharing the recipe with the world! Think collaborative evolution for the digital age.

Here's the gist:

• Meta's merging its top AI research groups to tackle this moon-shot project. ‍‍

• They plan to make the AGI code accessible "as much as possible," for the greater good.

• They're building a mind-bogglingly powerful AI brain with thousands of cutting-edge NVIDIA GPUs.

• Zuckerberg envisions future AGI assistants living in our augmented reality glasses, like your own personal Jarvis!

This could be a game-changer for our world. Open-source AGI means faster advancements, wider accessibility, and potentially, more ethical development.

What do you think? Is open-source AGI a utopian dream or a dystopian nightmare?

Interesting Reads

India’s Recovering Consumer Sentiments

Apart from positive commentary by HUL and Dabur India, this report by Refinitiv-Ipsos suggests India leads major countries based on consumer sentiments looking ahead to 2024. This was measured on parameters like – personal finance, investment, economic expectations, and employment.

How The Luxury Brands Compete With Customer Service

Customer service is a pain if you’re getting your Wi-Fi connection fixed or your food delivery order sorted. But not if you’re spending $25,000 on luxury goods a year. Check out how companies like Mytheresa and Neiman Marcus compete for their customers

AI Will Be Huge. But How Big, Exactly?

Watch this fascinating episode on the topic to get some insight.

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