BUZZ Investing: Markets React to Fed Rate Cut as Renewed Inflation Risks Emerge

During the recent period between index selection dates (December 12, 2024 – January 8, 2025), financial markets navigated a complex environment shaped by Federal Reserve policy adjustments and resilient economic data. The Federal Reserve’s decision to lower interest rates by 25 basis points on December 18 aimed to balance growth objectives against moderating inflation trends. However, this action was accompanied by cautious projections for future rate cuts, triggering sharp declines in equity markets. The S&P 500 and Nasdaq recorded their steepest one-day losses in months, reflecting heightened investor sensitivity to evolving monetary policy signals. Furthermore, the absence of the traditional "Santa Claus rally" during the final days of December and early January suggested a more subdued market sentiment than historical patterns.

Economic indicators during the Period highlighted robust activity across key sectors, renewing concerns about inflation’s persistence and its impact on the Federal Reserve’s timeline for easing policy. Strong labor market data and accelerating growth in the services sector underscored the economy’s resilience and pointed to inflationary pressures, particularly as input prices reached multi-year highs. These developments introduced additional market volatility, with investors reevaluating the outlook for policy adjustments. Meanwhile, the benchmark 10-year Treasury yield closed the Period at its highest level since April 2024, signaling a cautious market stance amid ongoing inflation concerns and the potential for extended monetary policy tightening.

The BUZZ NextGen AI US Sentiment Leaders Index ("BUZZ Index") returned -1.64% during the month of December compared to a return of -2.38% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index leads the S&P 500 with returns of 33.87% and 25.02%, respectively, as of the end of December.

Edge Computing Market Value Worldwide

GameStop's gains during the recent Period may have been influenced by a cryptic post from Keith Gill, known online as "Roaring Kitty," who remains a prominent figure in the stock's retail investor narrative. On December 25, Gill shared an image of a gift on his X (formerly Twitter) account without comment, sparking renewed interest in the stock among his followers. This led to a spike in trading activity, with GameStop shares rising intraday to their highest level since June, reflecting the ongoing impact of social media-driven sentiment on its stock performance. Lucid Group saw gains, supported by reports of increased production targets and expanding partnerships in the electric vehicle market. The beginning of deliveries for its new Gravity SUV, highlighted by a convoy of the first customers departing from its Arizona facility, also added to the attention around the company during the Period.

Top BUZZ Index Contributors: December 12, 2024 – January 8, 2025

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

Shares of Super Micro Computer among declining stocks in the BUZZ Index

Super Micro Computer (SMCI) faced declines during the recent Period, as a mix of factors continued to weigh on investor sentiment. Following the resignation of Ernst & Young as its auditor in October, concerns over the company’s accounting practices and delayed financial reporting have persisted. The company also received a compliance warning from Nasdaq for failing to file its reports in a timely manner, raising questions about potential delisting risks. Additionally, the stock’s heightened volatility and sensitivity to broader interest rate developments left it particularly exposed to shifts in market sentiment. These factors, coupled with year-end flows and portfolio rebalancing activities, may have combined to create a challenging environment for SMCI during the Period.

Bottom BUZZ Index Contributors: December 12, 2024 – January 8, 2025

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

BUZZ Index January 2025 Rebalance Highlights

Rocket Lab USA, Inc.
Over the past decade, advancements in spaceflight technology have accelerated, with SpaceX leading the industry, conducting more orbital launches in 2024 than the rest of the world combined. Rocket Lab USA (NASDAQ: RKLB), another key player, has made considerable strides since its founding in New Zealand in 2006. After relocating to the United States in 2013, the company developed its Electron small-payload rocket and Photon satellite, securing contracts with U.S. investors and space agencies. Last year, Rocket Lab announced plans to recover and reuse its rockets, aligning with SpaceX’s cost-saving and scalability efforts. Following its IPO in 2021 via a merger with SPAC Vector Acquisition Corp, RKLB’s stock traded around $5 for several years before breaking out last September. This surge was driven by significant revenue growth, a record backlog, contracts for its new large-payload rocket, and heightened investor enthusiasm for the space industry. By January, the stock reached an intra-day high of over $30 per share, underscoring the company’s rising profile. This month, Rocket Lab joins the BUZZ Index for the first time, with a 1.87% weight.

SoundHound AI, Inc.
SoundHound AI (NASDAQ: SOUN), originally launched as Midomi in 2005, gained early recognition for its ability to identify songs from playback or humming, amassing 100 million users by 2012. Over the years, it expanded into voice-enabled AI, with integrations in industries like automotive through partnerships with Hyundai, Mercedes-Benz, Honda, and Lucid Motors. After going public via a SPAC merger in 2022, SoundHound’s stock declined to below $1.00 per share but then surged in 2024, reaching nearly $25 per share in December, driven by strategic acquisitions and plans to enter new sectors like hospitality, retail, and financial services. However, the stock has faced a quick 50% drop from its all-time highs to start 2025, reflecting broader challenges in the sector, including increased competition from larger players and economic conditions that have made it harder for growth-oriented companies to attract investor support. Despite these headwinds, positive investor sentiment remains robust and SoundHound debuts in the BUZZ Index this month with a 3% weight, reflecting continued optimism around its potential in the evolving AI landscape.