No Curveballs in the PCE Report – But Here's What's Next

Economic Indicators - The Personal Consumption Expenditures (PCE) Price Index showed a month-over-month increase of 0.3%, leading to a year-over-year inflation rate of 2.7% [1] - Core PCE, excluding food and energy, rose by 0.2% month-over-month, resulting in a 12-month core rate of 2.9% [2] - Personal consumption expenditures increased at a pace of 0.6%, indicating resilience among U.S. consumers, while the personal saving rate edged up to 4.6% [3] Federal Reserve Outlook - The Federal Reserve is likely to find the PCE report mildly soothing, but core inflation remains significantly above the 2% target, complicating rate-cut decisions [4] - The Fed is balancing the need to control inflation without causing distress in the labor market, as wage growth is cooling and job creation has softened [5] - Expectations for interest rate cuts have strengthened, with the probability of two quarter-point cuts increasing from 60.5% to 63% following the PCE data release [6] Quantum Computing Developments - HSBC has reported a 34% improvement in algorithmic corporate bond trading efficiency through the use of quantum computing tools in collaboration with IBM [12] - This advancement represents a significant step in the practical application of quantum computing, showcasing its potential to solve real-world business problems [13] Investment Strategies in Quantum Computing - Investing in quantum computing is characterized by high volatility, with companies like Rigetti experiencing significant price fluctuations [15][16] - It is advised to focus on quantum companies with strong fundamentals rather than those driven by hype, as weak fundamentals can lead to stock declines [18] Agentic AI and Investment Opportunities - The introduction of AI shopping agents, which can autonomously make purchases, is being facilitated by Google's new Agent Payments Protocol [23] - Investment opportunities in agentic AI can be categorized into three main areas: platform owners like Alphabet, payment processors such as Visa and Mastercard, and infrastructure providers like Amazon and Microsoft [26][28] Broader AI Trends - The advancements in agentic AI are part of a larger trend in AI, which includes the development of physical AI capable of sensing and acting in the real world [30]