Jitters caused by yet another example of Trump tossing a hand grenade into a room and not worrying about the clean up until afterwards with the whole Colombia fiasco over the weekend ended up not being the main driver of prices on Monday morning.
That honor went to Chinese startup DeepSeek which announced that it is producing cutting-edge AI with minimal costs and no next-gen chips, potentially derailing the investment case for the entire AI supply chain, puncturing the sense of American exceptionalism in tech and maybe even undermining the bullish justification for the entire stock market rally dating back to late 2022.
The result was a total tech wreck. Nvidia plunged by 18%, Broadcom nose-dived by nearly 20% and the carnage extended to many other corners of the tech and AI market, as well as to the recently-surging Energy and Utilities sectors. Crypto markets collapsed. Bond prices surged, pushing interest rates lower as investors sought a safer haven for their money.
A knee-capping of the growth engine that has been the Magnificent Seven stocks and a bursting of the AI bubble has long been Wall Street’s biggest nightmare scenario and the tech-heavy indexes crashed at the open, with the NASDAQ quickly breaking down by almost 4% and the S&P 500 (with a 34% weighting to the Mag 7 stocks) by over 2%.
While things calmed a bit later in the session, the S&P 500 was still 1.5% lower by the close, with the NASDAQ down by double that percentage. Almost a trillion dollars was wiped off stock valuations over the course of the day including an almost $600 billion loss in Nvidia alone (greater than the entire value of Exxon-Mobil), a new record for a one-day loss in value by any company.
Stocks including Nvidia and other battered risk assets benefited from some very active bargain-hunting on Tuesday. The major indexes clawed back about two-thirds of what they lost in Monday’s bloodbath on the back of a sense that markets had maybe overreacted to the whole DeepSeek thing (ya think??).
Fed Decision Day arrived on Wednesday with Trump chest-thumping in advance of the interest rate announcement that he was much smarter than anyone at the Fed and reiterating his demand that the independent central bank lower interest rates.
As anticipated, his demand was roundly ignored by the interest rate-setting committee who are clearly taking a wait-and-see, data-dependent approach to inflation and the Fed Funds rate was left unchanged. It was up to chairman Powell to communicate the Fed’s future intentions at a potentially feisty press conference.
He did his very best to project a sense of “nothing to see here” but the financial press pack wasn’t buying it, firing question after question about the new political environment and how the Fed was going to respond, but Powell deflected them all.
The stock market reaction was muted, mainly because attention had swiftly turned away from the information vacuum that was the Powell press conference to a big slate of earnings reports coming after the closing bell and indexes finished marginally lower for the session. Bond traders gained no clarity about where Fed policy is headed and interest rates ticked a little lower.
Microsoft showed a big miss on its cloud business and Tesla once again failed to meet revenue estimates but offered somewhat rose-tinted forward guidance. Both stocks were initially punished in the after-market, driving Tesla’s price at one point below where it was in late 2021 before recovering. The assessment of Meta/Facebook’s numbers was pretty meh, but markets were impressed by old-school IBM.
None of the results were surprising enough to meaningfully impact broader markets on Thursday morning even after the European Central Bank cut local interest rates by 0.25%, the latest U.S. Q4 2024 Gross Domestic Product (GDP) estimate came in a little lower at 2.3% and weekly Jobless Claims were better than expected. Stocks drifted steadily higher for most of the session until Trump upset the apple cart by insisting that his punitive tariffs of 25% on Mexico and Canada and 10% on China will indeed be unleashed on Saturday and the indexes settled for only slight gains.
After the close, Apple handily beat estimates for revenue and profit and issued an optimistic short term outlook but the company continues to struggle with its iPhone sales in China. The stock moved higher when markets opened on Friday, strengthening the NASDAQ index where Apple is the largest holding. The early positive momentum was helped by no bad surprises from the latest Personal Consumption Expenditures (PCE) inflation measure which showed a still-muted rate of 2.6%.
But things turned ugly later in the day as tariff concerns kicked in when the White House again confirmed Trump’s plans and fears grew about how the following 36 hours would play out. Probably the country’s most influential economist right now, Claudia Sahm, said on Bloomberg TV that “even talking about tariffs can cause inflation” .
Stock prices immediately tumbled to finish Friday in the red and bring an eventful week to a close on a losing note with the promise of more tariff-driven chaos and volatility to come when markets open again on Monday morning.
OTHER NEWS ..
Now Hiring .. Musk’s Department of Government Efficiency has set up a job site to recruit software engineers and tech staffers. Key requirements on your resume: Applicants must be US citizens, agree to work in-office in Washington, DC and provide up to three examples of “exceptional ability.” If for some bizarre reason, you fancy the idea of working for Musk, you can click here to apply.
Holy Guacamole .. Americans’ love of guacamole is about to be put to the test. Mexico supplies over 90% of the avocados Americans eat, and Trump is likely to make them a lot more expensive with his plan to slap 25% tariffs on Mexican imports as early as this weekend. Exacerbating the situation is that a drought in Mexico shrank the recent harvest and reduced the average size of the crop, meaning there are fewer of the large avocados that Americans prefer.
Prices for avocados are already up 14% from a year ago. A key date on the avocado calendar is coming up next weekend with the Super Bowl, which is by far the biggest day of the year for eating avocados in the U.S.
Another Criminal Release? .. The parents of convicted fraudster Sam Bankman-Fried are apparently looking at ways to secure a pardon from crypto fanboy Trump for the one-time billionaire, holding meetings with figures considered to be in the president’s orbit agitating for the release of their son. The 32 year-old was convicted of fraud last year and sentenced to 25 years in prison. It may not be as outlandish as it seems as a thousand insurrectionists as well as Ross Ulbricht, founder of the black market drug and sex trafficking enterprise, Silk Road, are now walking free courtesy of Trump.
ARTICLE OF THE WEEK ..
What do you think the long term historical annual returns are for stocks, real estate, bonds, gold and cash? How do they stack up against each other?
Have a guess and then take a look at this article and see how you did.
THIS WEEK’S UPCOMING CALENDAR ..
It’s jobs week again and there’s another heavy slate of Q4 2024 earnings reports coming up this week. About one in four S&P 500 companies are scheduled to report, including Amazon, Alphabet/Google, Disney, PepsiCo, Novo Nordisk, Pfizer, Uber, Eli Lilly, Philip Morris, Qualcomm, Palantir, AMD, Honeywell, Conoco Phillips, Ford, PayPal, Expedia, Tyson Foods, Spotify and Chipotle.
On Tuesday, we get to see the latest Job Openings and Labor Turnover Survey. The Jobs Report on Friday is expected to show growth of +165k payrolls and an unchanged unemployment rate of 4.1%.
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing U.S. sector: Healthcare (two biggest holdings: Eli Lilly, UnitedHealth Group) ⬆︎ 1.7% for the week.
Last week’s worst performing U.S. sector: Energy (two biggest holdings: Exxon-Mobil, Chevron) for the second week in a row ⬇︎ 3.8% for the week.
SPY, the S&P 500 Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest U.S. companies. Its price fell 1.5% last week, is up 2.7% so far this year and ended the week 1.3% below its all-time record closing high (01/23/2025).
IWM, the Russell 2000 Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest U.S. stocks. Its price fell 1.6% last week, is up 2.5% so far this year and ended the week 6.6% below its all-time record closing high (11/08/2021).
INTEREST RATES:
FED FUNDS* ⬌ 4.33% (unchanged)
PRIME RATE** ⬌ 7.50% (unchanged)
3 MONTH TREASURY ⬇︎ 4.31% (4.35% a week ago)
2 YEAR TREASURY ⬇︎ 4.22% (4.27% a week ago)
10 YEAR TREASURY*** ⬇︎ 4.58% (4.63% a week ago)
20 YEAR TREASURY ⬇︎ 4.88% (4.91% a week ago)
30 YEAR TREASURY ⬇︎ 4.83% (4.85% a week ago)
Treasury data courtesy of ustreasuryyieldcurve.com as of the market close on Friday.
* Decided upon by the Federal Reserve. Used as a basis for determining high yield savings accounts rates.
** Used as a basis for determining many consumer loan rates such as personal, home equity and auto.
*** Used as a basis for determining mortgage rates.
AVERAGE 30-YEAR FIXED MORTGAGE RATE:
⬇︎ 6.95%
One week ago: 6.96%, one month ago: 6.88%, one year ago: 6.64%
Data courtesy of: FRED Economic Data, St. Louis Fed as of last Thursday.
FEDWATCH INTEREST RATE TOOL:
Where will the Fed Funds interest rate be after the next rate-setting meeting on March 19th?
Unchanged from now .. ⬆︎ 82% probability (72% a week ago)
0.25% lower than now .. ⬇︎ 18% probability (28% a week ago)
What is the most commonly-expected number of 0.25% Fed interest rate cuts in 2025?
⬆︎ 2 (up from 1 a week ago)
All data based on the Fed Funds interest rate (currently 4.33%). Calculated from Federal Funds futures prices as of the market close on Friday. Data courtesy of CME FedWatch Tool.
FEAR & GREED INDEX:
“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet.
The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.
Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.
Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.
A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.
Data courtesy of CNN Business as of Friday’s market close.
WWW.ANGLIAADVISORS.COM | SIMON@ANGLIAADVISORS.COM | CALL OR TEXT: (646) 286 0290 | FOLLOW ANGLIA ADVISORS ON INSTAGRAM
This material represents a highly opinionated assessment of the financial market environment based on assumptions and prevailing information and data at a specific point in time and is always subject to change at any time. Although the content is believed to be correct at the time of publication, no warranty of its accuracy or completeness is given. It is never to be interpreted as an attempt to forecast any future events, nor does it offer any kind of guarantee of any future results, circumstances or outcomes.
The material contained herein is not necessarily complete and is also wholly insufficient to be exclusively relied upon as research or investment advice or as a sole basis for any financial decisions, including investment decisions or making any kind of consumer choices, without further consultation with Anglia Advisors or other qualified Registered Investment Advisor. The user assumes the entire risk of any decisions made or actions taken based in whole or in part on any of the information provided in this or any Anglia Advisors communication of any kind.
Under no circumstances is any of Anglia Advisors’ content ever intended to constitute tax, legal or medical advice and should never be taken as such. Neither the information contained or any opinion expressed herein constitutes a solicitation for the purchase of any security or asset class. No client advice may be rendered by Anglia Advisors unless or until a properly-executed Client Engagement Agreement is in place.
Posts may contain links or references to third party websites or may post data or graphics from them for the convenience and interest of readers. While Anglia Advisors might have reason to believe in the quality of the content provided on these sites, the firm has no control over, and is not in any way responsible for, the accuracy of such content nor for the security or privacy protocols that external sites may or may not employ. By making use of such links, the user assumes, in its entirety, any kind of risk associated with accessing them or making use of any information provided therein.
Those associated with Anglia Advisors, including clients with managed or advised investments, may maintain positions in securities and/or asset classes mentioned in this post.
If you enjoyed this post, why not share it with someone or encourage them to subscribe themselves?
