Good morning.

Right now, the market is around the same level it closed last Friday … which probably offers slight comfort to investors (considering last weekend’s tariff concern) … but this worry has not completely gone away.

In fact, University of Michigan reports U.S. consumer sentiment dropped to a 7-year low as election euphoria wanes and thoughts move back towards tariffs and inflation. What is most interesting in their report is a sharp movement in inflation expectation, as the “year ahead” view on inflation was 3.3% just one month ago … and it has suddenly jumped up to 4.3%!

At the moment, Bloomberg reports economists see 55 bps (0.55%) in cuts to take place in 2025, but the “market” (whoever the heck that is) and “some Fed officials” don’t fully agree … and provide the view that 44 bps (0.44%) is more likely in the cards.

Earnings are now being reported, and Goldman Sachs says “AI” is mentioned in 50% of fourth-quarter conference calls.  Frankly, I thought this would be greater … especially in light of a report that both Amazon and Microsoft are both making the claim that they can’t keep up with AI demand.

Now, I know many readers are in the investment industry … but some “regular” (aka. “normal”) people read this.  In fact, a friend … never having used AI … had me walk through steps for him to try it out.  So … if you are also curious, you might want to try something as simple as going to chatgpt.com and asking a basic question to see what it can do.  Just note the important thing is to be as detailed as possible … and let the “chatbot” know what you are asking but also feel free to give a little history as to your background (such as: “I am a finance lecturer about to present to a room of MBA students.  They would like to know … blah, blah …” and introduce your question. This type of “prompt” provides more interesting detail than just going ahead and putting in a simple query.

While you might discount “AI” as being just a fad or a buzzword, keep in mind BofA Global Research put “OpenAI o1” through a test and concluded that it outperformed “human experts” in answering PHD-level science questions … and by quite a bit. Yikes.

I have a final note today on vaccines, trying to stay clear of political landmines … as the Center for Disease Control and Prevention reports that a 95% vaccination rate of kindergarten students for measles, polio and whooping cough as of 2020 dropped to around 93% presently for each of these diseases … making you wonder if the distrust of the Covid vaccine resulted in distrust of all vaccines … even those with long and impressive track records.

That about wraps it up for today as I need to drive up to New York (ever-thankful that the NJ Turnpike has been improved).

On a final note, I learned something this morning … as I read that 80% of the human body is made up of water.

… it seems I’m not fat after all.

I’m just flooded.

Have a great day,

Joseph G. Witthohn, CFA

Have any questions? Please contact info@teamemerald.com