Better-Than-Feared PCE Brings Buying Into Stock Market, Trump's Stroke Of Genius

The stock market breathed a sigh of relief today as the Personal Consumption Expenditures (PCE) data came in better than expected. The core PCE, the Federal Reserve's preferred inflation gauge, rose 0.3% in January, matching economists' expectations. This news brought relief buying into the stock market, as investors had feared a worse outcome based on yesterday's GDP data.



The U.S. economy is 70% consumer-based, so prudent investors pay close attention to personal income and personal spending data. Today's PCE data showed that personal spending came in at -0.2% versus the 0.2% consensus, indicating that the consumer is finally pulling back. Personal income, however, came in at 0.9% versus the 0.3% consensus, suggesting that consumers still have some spending power.

Looking ahead, blind money will flow into the stock market on Monday and Tuesday, as it typically does at the beginning of the month. However, there are two opposing forces at play. On one hand, the stock market often moves to the upside on Fridays due to short squeezes. On the other hand, there is a downside risk due to the fear that the stock market may open lower on Monday.



In the early trade, money flows were positive in Amazon.com (AMZN), Alphabet Inc Class C (GOOG), Meta Platforms Inc (META), and Microsoft Corp (MSFT). Meanwhile, money flows were negative in Apple Inc (AAPL), NVIDIA Corp (NVDA), and Tesla Inc (TSLA). The S&P 500 ETF (SPY) and Invesco QQQ Trust Series 1 (QQQ) had neutral money flows.

President Trump is meeting with Ukraine's President Zelenskyy today, apparently to sign a mineral deal. This deal could prove to be a stroke of genius for Trump, as it would reduce the U.S.'s dependence on China for rare earth minerals. China currently has a strategic advantage over the U.S. due to its control of the rare earth mineral supply chain. By securing a deal with Ukraine, which has significant rare earth mineral reserves, the U.S. can mitigate this risk.



The only U.S.-based publicly traded rare earth mineral company is MP Materials Corp (MP). As full disclosure, MP is in The Arora Report's ZYX Buy portfolio that surrounds the Core Model Portfolio. The Arora Report's analysis suggests that the long-lasting impact of tariffs is not yet priced into the stock market. The market continues to believe that tariffs are a negotiating tactic and will not be enforced. However, there is a fair probability that tariffs on Chinese goods may last for a long time and may be enforced. Prudent investors should not dismiss this scenario, as it could have significant implications for the stock market and the broader economy.

In conclusion, the better-than-expected PCE data brought relief buying into the stock market today. However, investors should remain vigilant and consider implementing a protection band consisting of cash or Treasury bills, as well as short to medium-term hedges and short-term hedges, based on their individual risk preference. The potential mineral deal between the U.S. and Ukraine could have long-term benefits for the U.S. economy and energy independence, but investors should also be prepared for any potential geopolitical tensions that may arise from this deal.