A Court Case With High Implications For The Tech Sector And Inflation Still Higher Than Expected

TL;DR

• A court case against Google has the potential to make social media giants responsible for any content posted on their platforms, which would have far reaching implications for investors
• A key measure of inflation, Core PCE, came in higher than expected in January, raising the likelihood of another large Fed rate hike next month
• With high inflation potentially taking longer than expected to level out, inflation resistant investments could remain attractive for a while yet
• Top weekly and monthly trades

Subscribe to the Forbes AI newsletter to stay in the loop and get our AI-backed investing insights, latest news and more delivered directly to your inbox every weekend. And download Q.ai today for access to AI-powered investment strategies.

Major events that could affect your portfolio

There’s a case going through the U.S. Supreme Court right now which could have huge implications for the tech sector.

The case is Gonzalez v. Google, which centers around Section 230, part of the Communications Decency Act of 1996, which is central to the way the entire social media industry operates. It essentially allows social media platforms to avoid prosecution for third party comments on their sites.

It means that Mark Zuckerberg doesn’t have to worry about a lawsuit being leveled at Meta because of nasty reviews or comments left on a Facebook post. It’s a key differentiator between social media and traditional media, where newspapers and magazines operate under strict libel laws.

Nohemi Gonzalez was a 23-year-old American exchange student in France, who was tragically killed alongside 129 other people by an ISIS gunman in Paris. Gonzalez’s family are arguing that the gunman was influenced by extremist videos on YouTube, which puts Google in violation of the Anti-Terrorism act.

There are similar cases ongoing against Twitter and Meta, and a result in the favor of the plaintiffs would be a major blow for Big Tech. It’s not difficult to see the problems that could arise if social media platforms were able to be held legally and financially responsible for the content posted by their users.

For investors, it would pose a major risk to the future profitability of the platforms, which already contend with a multitude of content moderation challenges.

—

Talk of inflation has leveled off a little in recent weeks. We’ve not had cause to get into it since back on the 13th January, but today we’ve seen the release of some new data that’s worth taking a closer look at.

The Consumer Price Index gets all the glory and the headlines, but it’s the Core Personal Consumption Expenditures (PCE) index which is more closely watched by members of Fed in the lead up to their interest rates decisions.

The reason for that is because the index specifically measures the level of consumer spending, which is one of the key variables the Fed is trying to maneuver through changes in interest rates.

Figures for January were released today, showing an increase for the month of 0.6% and an annual figure of 4.7% for the figures excluding the volatile food and energy sectors. That’s higher than the 0.5% and 4.4% that analysts had been expecting, and it’s news that members of the Fed aren’t likely to be too happy about hearing.

Markets sold off on the news, and according to data from CME Group, the chance of a 0.50 percentage point increase in the base rate next month went up to around a 33% likelihood.

For investors, it’s potentially worrying news as well. There’s been a solid start to the year for markets generally, with the S&P 500 up over 3% and the NASDAQ Composite up over 9%. But if the Fed needs to re-up the pace of their rate hikes, we could see many of these gains pared back.

This week’s top theme from Q.ai

So despite the Feds best efforts, high inflation could be with us a little longer than we’d hoped. According to JPMorgan Chase CEO Jamie Dimon, the Fed has “lost a little bit of control of inflation.”

With that said, it’s not all bad news and there have been encouraging signs in some of the economic data, particularly around the job market which remains incredibly robust. For investors, it’s a challenging market to navigate given all the uncertainty around.

If you’re concerned about the long-term impact of high inflation, there are steps you can take to help protect your portfolio against it. There are a range of different assets which have either traditionally worked well as a hedge against inflation, or specifically designed to protect against it.

Gold and precious metals are some of the most well worn options, being used as an investment asset class for thousands of years and still holding an important place today. Agricultural commodities are another, as the demand for food and goods like wool and coal are very resistant to changes in price. We’ve all gotta eat.

Treasury Inflation Protected Securities (TIPS) are U.S. Treasuries which are designed to pay income which fluctuates with the level of inflation. If inflation goes up, so does the interest payable, which is a golden ticket when prices rise quickly.

We’ve packaged all of these assets in our AI-powered Inflation Kit, which uses AI to analyze the predicted risk and return for all of these assets in the coming week. It then automatically rebalances the Kit in line with those predictions.

Top trade ideas

Here are some of the best ideas our AI systems are recommending for the next week and month.

Catalyst Pharmaceuticals (CPRX) – The pharma company is one of our Top Buys for next week with an A rating in our Quality Value factor. Earnings per share are up 49.69% over the last 12 months.

Camber Energy (CEI) – The online used car dealer is our Top Short for next week with our AI rating them an F in Quality Value and a D Low Momentum Volatility. The company lost over $60 million in 2020 and almost $170 million in 2021.

Harmony Bioscience (HRMY) – The pharmaceutical company is our Top Buy for next month with an A rating in Technicals and a B in Quality Value. Revenue was up 43.4% in 2022.

CytoDyn (CYDY) – The biotech company is our Top Short for next month with our AI rating them an F in Growth and Low Momentum Volatility. Gross profit was -$172 million in the 12 months to end of November 2022.

Our AI’s Top ETF trades for the next month are to invest in fintech, Chinese tech stocks and microchip stocks, and to short Indian companies and US momentum stocks. Top Buys are the Invesco China TEchnology ETF, the ARK Fintech Innovation ETF and the SPDR S&P Semiconductor ETF and Top Shorts are the iShares MSCI India ETF and the iShares Edge MSCI USA Momentum Factor ETF.

Recently published Qbits

Want to learn more about investing or sharpen your existing knowledge? Qai publishes Qbits on our Learn Center, where you can define investing terms, unpack financial concepts and up your skill level.

Qbits are digestible, snackable investing content intended to break down complex concepts in plain English.

Check out some of our latest here:

Download Q.ai today for access to AI-powered investment strategies.