Source of earnings growth will be telling for inflation expectations, says DCLA's Sarat Sethi

Federal Reserve & Interest Rates - The Federal Reserve faces a dilemma due to a lack of clear data, relying on publicly available information [2] - Upcoming earnings seasons, starting with Delta and followed by financials, will provide insights into pricing strategies, profit margins, and growth, which are crucial for assessing inflation expectations [2][3] - High consumer inflation expectations are driving inflation, necessitating a decrease for the Federal Reserve to consider rate cuts [4] - The current 2% inflation target, set in 2010, may be outdated due to changes in globalization, tariffs, and immigration [4][5] - Lower long-term interest rates (10, 15, 30-year) are crucial for DCF models, mortgages, corporate borrowing, and reducing the budget deficit [6][7] - The bond market's reaction to Federal Reserve rate cuts depends on the reason for the cuts; cuts driven by inflationary pressure could lead to higher long-term rates, negatively impacting the stock market, dollar, and deficits [8] AI, Nvidia & OpenAI - OpenAI plans to deploy 10 gigawatts of AI data centers using Nvidia systems, requiring approximately $50-60 billion per gigawatt for land, power, shell, computing, and networking [10][11] - OpenAI currently lacks the necessary funds and will need to raise capital through revenue growth, equity, or debt [11][12] - Vendor financing, while common in retail, raises concerns about overvaluation and potential risks if plans don't materialize, suggesting a need for diversified exposure [14][15]