In September 2024, Wall Street economists largely anticipated a modest 25 basis point rate cut by the Federal Reserve, yet the prediction market Kalshi projected a larger cut of 50 basis points. When the Fed ultimately adjusted rates by this greater amount, it highlighted the accuracy of Kalshi, which claims to have a perfect forecasting record regarding Fed decisions, outperforming traditional forecasting methods by 40.1% in mean absolute error during inflation shocks from February 2023 to mid-2025.
Amidst a tumultuous earnings season, the iShares Expanded Tech-Software Sector ETF (IGV) has seen a decline of 33% since mid-October, with analysts warning of potential further losses driven by AI’s disruptive impact on traditional Software-as-a-Service (SaaS) business models. As companies automate processes traditionally performed by humans, firms known for serving as intermediaries may face diminishing earnings power. The report categorizes vulnerable stocks, including Asana Inc. (ASAN) and GitLab Inc. (GTLB), highlighting that more pain could follow in the SaaS sector.
With the data center sector booming due to increased AI infrastructure needs, vacancy rates currently sit at just 1%, with 92% of new construction already pre-committed. Companies involved in the physical layers, such as EQT and Lithium Americas, are viewed as favorable investments amidst the emerging AI landscape, reflecting a convergence of policy, capital, and necessity that could drive market growth in these foundational sectors.
