🌭 America gets the works

What’s going on here?

The US economy created a shockingly high number of new jobs in December, once again going above and beyond to outpace market forecasts.

What does this mean?

Forget about whispers of a slowdown: the US labor market appears to be gaining steam instead. The world’s biggest economy added 256,000 new jobs in the final month of last year – far surpassing the 160,000 that economists were predicting. Even better, the unemployment rate dipped to 4.1%. That marked the 48th consecutive month of job growth for American workers, blunting talk (at least for now) about a potential recession. And it wasn’t just this data painting a rosy picture, either: a gauge of business activity in the all-important services sector hinted at even more strong economic expansion ahead.

Why should I care?

For markets: Goodbye, rate cuts.

With inflation generally cooler and the job market proving strong overall, there’s little hope that the Federal Reserve (Fed) will lower interest rates again anytime soon. Traders are now betting that the next trim will happen in September, instead of June. But sentiment changes in the blink of an eye these days, so don’t be surprised if an unexpectedly hot inflation report next week turns the conversation from cuts to hikes.

The bigger picture: Good news is… bad news.

That plucky employment data has markets bracing for a reaccelerating US economy. And while that’s good news overall, it’s a bitter pill for stock investors. They’ve been longing for the easier financing that interest rate cuts bring – and with a strong labor market, they’re less likely to get it. And, yep, higher rates slow the economy and nibble away at future cash flows, making savings accounts more appealing than stocks. That’s likely why the S&P 500 initially plunged after the job data came out – and why the 10-year US Treasury yield inched back up toward its 2023 high.

What’s going on here?

TSMC – the world’s leading chipmaker and Nvidia’s go-to supplier – posted record-smashing revenue for its latest quarter.

What does this mean?

The Taiwan-based firm said sales jumped 39% in the fourth quarter, helping it to end the year with a record $88 billion in revenue. That boom was fueled by soaring demand for AI and smartphone chips, which TSMC supplies in droves to tech heavyweights like Apple and Nvidia. The news likely had investors breathing a sigh of relief. See, TSMC’s shares have risen a nose-bleeding 88% over the past year, pushing the company’s market cap to $1.1 trillion – and that’d led some to worry that the enthusiasm was overdone.

Why should I care?

For markets: Microchips and megatrends.

AI is still the market’s big driver, even if the tech rally has hit a bit of a speed bump. Things like Microsoft’s $80 billion pledge for AI-ready data centers and Foxconn’s recent growth from AI server demand are proof that the industry’s buzz is still going. So all eyes will be on TSMC next week, when it opens its books a bit wider. The firm’s full earnings report is expected to offer a glimpse into where the semiconductor industry – and the wider tech sector – may be headed next.

The bigger picture: Bottleneck investing.

The AI boom isn’t just about chips: it includes the massive infrastructure needed to make all that tech work. Energy and water resources are key players here, and companies that offer innovative solutions – like small nuclear reactors for clean, dependable energy, or water-efficient tech for data centers – are set to shine.