MARKET RECAP

• S&P 500 +1.66%.
• Fueled by AI demand for their chips, NVDA continues skyrocketing to a market capitalization of almost $2 trillion. CEO Jensen Huang said AI is hitting a “tipping point” and that “Demand is surging worldwide across companies, industries and nations.” Earnings were up eightfold.
• International markets are rallying. Japan’s Nikkei 225 hit a record high for the first time since 1989.
• Unemployment claims fall to 201k.

CHART OF THE WEEK

SCOREBOARD

MARKET RECAP

• The SPX hit a record on Monday but closed 0.4% lower for the week. US stocks -0.18%, international stocks +0.92%, bonds -0.54%.
• Higher inflation put a pause on recent market advances. CPI was up 0.3% for the month and 3.1% for the year. Core inflation was up 3.9%. The SPX fell 1.4% on the news but gained back ground as the week went on.
• PPI was up 0.7% year over year versus expectations of +0.3%.
• Bitcoin cracked the $50,000 level (see the chart below).
• Retail sales were down a seasonally adjusted 0.8% in January; economists expected an increase.
• Unemployment claims fell to 212k.
• Trump v Biden (the highlights below are from the article in this week’s Barron’s – “Trump vs Biden: Who Can Handle the Reins of a Hot Economy)
  • Debt
    • Under Biden, debt will most likely exceed 100% of GDP.
    • Trump added $8.4 trillion to the debt.
    • Biden will add about $4 trillion.
    • Neither party has shown any serious interest in reducing the debt or at least slowing its growth.
    • For now, the debt is manageable.
  • Taxes
    • Many parts of the 2017 tax cuts expire starting in 2025.
    • Marginal rates for individuals will increase.
    • Estate tax exemption will be cut in half.
    • Deduction limits for state and local taxes will change.
    • Trump will try to make those extensions permanent, which would cost $3.5 trillion, according to government agencies.
    • Trump is also thinking about corporate rate cuts.
    • To do either will probably require cuts in spending.
    • Biden will extend tax reductions for households with less than $400k in income.
    • Biden would pay for that by increasing taxes on the wealthy and those with the highest income.
    • He would increase corporate taxes, including a tax on buybacks.
    • He might cut some spending.
  • Tariffs
    • Trump’s tariff strategy from his time as President has been judged “at best a wash” or “mildly negative”, according to MIT economist David Autor.
    • Biden’s main thrust has been to prevent China from getting US technology.
    • Trump says he would increase Chinese tariffs to 60%. That would be a $300 billion tax increase to American consumers, according to Erika York of the Tax Foundation.
    • The threat might be stagflation, lower growth, higher prices.
  • Federal Reserve
    • Powell’s term ends in May 2026.
    • Biden hasn’t spoken on Powell’s reappointment, but Trump has indicated no.
    • Trump does not respect the Fed’s independence.
    • Biden does.

CHART OF THE WEEK

SCOREBOARD

MARKET RECAP

• SPX hit a new record and closed above 5,000.
• US stocks +1.52%, SPX +1.37%, Nasdaq +2.31%, R2000 +2.54%, international +0.79%, bonds -0.84%.
• SPX and Nasdaq up 14 out of the last 15 weeks.
• Earnings are coming in 6.9% higher than expectations, suggesting 9% earnings growth.

CHART OF THE WEEK

The S&P 500 breaks 5,000 and hits an all-time high.

SCOREBOARD

MARKET RECAP

• US stocks +1.26%, the S&P 500 is at a record high. International -0.14%, bonds +0.69%. Oil drops by 7.35%.
• The jobs report hammered expectations; non-farm payrolls were up by 353k versus a 185k estimate. Average hourly earnings were up by 0.6% m/m and 4.5% y/y. The unemployment rate remained steady at 3.7%. The only negative was a decline in the average workweek to 34.1 from 34.1, but the bad January weather gets the blame.
• Q1 growth is estimated to be 4.2% by GDPNow.
• As expected, the Fed kept interest rates steady.

GRAPH OF THE WEEK

The chart below shows how earnings estimates have progressed since 2020. The black line represents 2024, and the green line represents 2025. In both cases, you see a slight decline as time goes on. That is not unusual, as reality hits as we get closer to the actual year-end dates.

SCOREBOARD