US stocks were down by 0.90% for the week, and bonds were up by 0.40%.
NVDA had a record market cap loss on Monday when the market decided to pay attention to Deep Seek, a Chinese AI application that apparently is as good as American models like ChatGPT and Gemini, and produced at a fraction of the cost. The NASDAQ fell by 3.1% on the day.
Trump is carrying through on his tariff threat, a bad idea that will harm the economy. Putting a 25% tariff on Canada and Mexico and 10% on China, with the EU to follow. Stocks turned down on Friday after the comments. According to Census Bureau data, Canada and Mexico combined for 28% of US imports. In Trump’s make-believe world, there will be no inflationary impact. We agree with many Trump policies, but he is way off-base on this one. Trump’s bullying is going to hurt America long-term, making China seem like a stable partner.
The Fed did not change interest rates.
Inflation forecasts have been slowly rising. Economists estimate 2.6% compared to 2.2% before the election.
Trump was inaugurated, and markets rallied. The SPX was up 1.74% and hit its first record high of 2025 on Thursday.
Trump launched a crypto coin in his name and then one for the first lady, indicating that traditional ethics don’t matter. But who would expect otherwise?
Trump held off closing down TikTok for 75 days and issued pardons to all of the January 6th rioters, even the most violent ones.
Trump announced a $500 billion infrastructure investment by OpenAI, Oracle, Softbank, and a UAE-based company.
At a virtual address at the World Economic Forum, Trump said “I’ll demand that interest rates drop immediately.” Trump is also going to press OPEC to cut prices.
Bitcoin hit a record of 109,000 on Monday but has since fallen back to 101,000.
There were no immediate tariffs on day one, so that helped markets. But indicated that may change on February 1 in regards to Mexico and Canada.
The SPX earnings yield is 4.1% versus a 10-year yield of 4.63%,the biggest disparity since 2002.
US stocks were down by 2.22%, international stocks by 2.94%, and bonds by 0.66%.
The Dow ended a 10-day losing streak on Friday, the longest since the 1970s.
The Fed cut interest rates by 25 points, but Powell’s “hawkish” commentary, even though we thought it was telegraphed beforehand, sent markets into a tailspin, with the Nasdaq and SP500 falling by more than 3% at its low. It was the worst performance by the equity markets on a Fed Day since 2001.
The 10-year treasury is at 4.54% and is up 34 basis points this month.
Bitcoin broke 108,000 on Tuesday but is 95,600 as of this writing (Sunday afternoon).
The NASDAQ managed a small gain, +0.34%, but the S&P 500 fell by 0.64%. The Dow was down by 1.82% and small caps fell by 2.58%.
CPI increased by 2.7% year over year, so falling inflation has seemed to stall out. That put pressure on treasury yields; the 10-year increase was 4.4% from 4.15%.
The overall market is performing poorly. According to Dow Jones Market Data, for 10 straight days, more stocks in the S&P 500 have gone down than have gone up. This is the longest streak since 2000.
Trump was named Man of the Year by Time Magazine and visited the NYSE to receive the honor. Since the election, Trump has seemed more stable and less bitter, and his visit to the NYSE struck all the right chords and was pretty impressive. Trump emphasized his commitment to fostering a strong economy, promising substantial tax cuts and incentives for domestic manufacturing. He proposed reducing the corporate tax rate from 21% to 15% for companies that produce goods in the U.S. He also highlighted his administration’s focus on increasing oil production to help control inflation and reduce grocery prices. However, there could be the possibility that it might have been one of those high profile that marked the top!
The SPX was up 1.06% for the week and 5.96% for the week.
After Trump threatened a 25% tariff on Mexico, Mexican President Claudia Sheinbaum said she would retaliate. But by the end of the week, all was good; they both said they had a great meeting.
Investors seem to believe that Trump’s tariffs are a negotiating tool.
Valuations are sky high, the trailing p/e is about 26, and the Magnificent Seven sells at 30 times forward earnings.
