Cover:
-Jamie Dimon is considering various future endeavors, including starting a news outlet focused on public policy, the possibility of serving in a government role, and writing a book, while also expressing interest in owning a bar. Despite these options, Dimon remains committed to leading JPMorgan Chase, aiming to stay in his CEO role for at least three to four more years, subject to board approval. He acknowledges the significant challenges ahead, including geopolitical tensions, regulatory uncertainties, the rise of new market competitors, and the impact of artificial intelligence on banking operations. Dimon's tenure has seen substantial achievements, such as the acquisition of First Republic Bank and the management of the Apple Card. He is also focused on strategic investments in US national security and has recently celebrated his 20th anniversary as CEO and his 70th birthday, underscoring his influential role in the banking industry.
Interview:
-In a challenging market influenced by rising oil prices and the Iran war, value stocks are outperforming momentum and growth stocks. At the Value Invest New York conference, fund managers emphasized the importance of selecting individual stocks over the broader market, which is swayed by major technology companies and AI trends. Cole Smead from Smead Capital Management advocated for energy stocks due to expected consolidation, while downplaying concerns over private credit risks. Other fund managers shared their top picks, such as Brian Louko's recommendation of Montana Aerospace, capitalizing on the airline industry's need for new aircraft, and Richard Garstang's endorsement of Pason Systems, a leader in electronic drilling recorders for oil rigs. Simon Adler suggested investing in undervalued stocks like Japan’s Nippon TV, despite challenges from streaming services. Rui Cardoso also highlighted Japan's Shionogi, a pharmaceutical company managing its patent expiry through new drug developments. The overarching message is that promising investment opportunities exist beyond the U.S. market.
Tech Trader:
-Nvidia is transitioning into a new phase of AI demand, with a focus on running AI models (inference), after initially benefiting from training models that boosted chip sales. CEO Jensen Huang emphasized this at the recent GTC conference, presenting Nvidia as an essential player in AI computing, akin to Apple's ecosystem. He highlighted Nvidia's comprehensive control over hardware and software for AI, enabling efficient integrations, much like Apple's "walled garden" where different devices work seamlessly together. Nvidia employs an "extreme codesign" approach, optimizing multiple chips within its Vera Rubin AI server for better performance. The company is also expanding its data center networking capabilities, with significant revenue growth in this area. Key to Nvidia's competitive edge is not just its hardware but its robust software, exemplified by the integration of Groq's AI inference chips and its proprietary software Dynamo that coordinates mixed server operations.
The Trader:
-Retailers had anticipated gains from higher tax returns, but the ongoing war in Iran has changed the outlook significantly. Since the conflict began, the State Street SPDR S&P Retail ETF has dropped about 10%, more than the S&P 500’s decline, due to worries that rising gasoline prices will reduce consumer spending. According to TD Cowen's Oscar Munoz, a sluggish U.S. consumer now faces global oil shocks, exacerbated by weakening labor and equity markets, leading to potential decreases in real incomes amid rising inflation. J.P. Morgan's Natasha Kaneva notes early signs of demand destruction in Asia and Europe, with the U.S. feeling pressure from high gas prices affecting food costs, notably corn. Stocks have suffered, particularly for companies hesitant to raise prices amid inflation, while those with better pricing power and direct sales appear more protected. Profits may see a near-term decline to prevent "sticker shock" for consumers. According to Jefferies consumer analysts, including Blake Anderson, the impact trajectory typically flows from costs to margins before affecting demand, marking distinct winners and losers. Companies like department stores facing turnarounds (Kohl’s, Macy’s, VF Corp., Capri Holdings) may struggle, while those with robust pricing power and higher direct-to-consumer sales (LuxExperience, Tapestry, Deckers Outdoor, Ralph Lauren) appear more resilient.
-In recent times, Ross Stores has successfully focused on delivering value to consumers amid ongoing inflation, leading to internal changes that enhance its market prospects. The company's year-over-year sales growth reached $723M in its latest fiscal fourth quarter, surpassing TJX Cos.' Marmaxx sales growth of $684M for the first time since 2017. Analyst Corey Tarlowe notes that despite Ross's smaller revenue base of $21.1B compared to Marmaxx's $34.6B in 2024, the company is achieving significant absolute dollar gains in the off-price segment due to improved customer traffic. This marks a noteworthy shift in the competitive landscape, as TJX has been a long-standing leader in off-price retailing. CEO James Conroy, who took the reins in 2024 after an impactful tenure at Boot Barn, has directed efforts like store refreshes and better marketing strategies to align product offerings with local consumer demands. Tarlowe emphasizes that enhancements in merchandising and promotional strategies are resonating well with value-conscious shoppers, leading to increased traffic and improved comparable store sales.
Features:
-The potential release of Fannie Mae and Freddie Mac from government control is uncertain, prompting investors to lobby President Trump for assistance in realizing returns on their investments. Hedge fund manager Bill Ackman has been actively promoting a plan for Trump to retire the government’s preferred shares, which grant a $370B claim on the mortgage-financing companies. Ackman's proposal was presented during meetings with key administration officials, including National Economic Council Director Kevin Hassett and Treasury Under Secretary for Domestic Finance Jonathan McKernan. Since the 2008 financial crisis, Fannie and Freddie have operated under government control, suspending dividends to private shareholders. The shares now represent a political gamble, hinging on government actions that could either lead to significant losses for current shareholders or yield substantial profits, leaving shareholders in a state of uncertainty.
Europe:
-ASML Holding's stock has recently declined by 7%, falling from highs partially due to a rotation away from semiconductor stocks linked to the artificial intelligence boom. Analysts at TD Cowen view this as a favorable entry point for investors, noting that ASML typically trades at a premium compared to its US large-cap peers, though this premium has decreased from 120% to about 20% since late 2022. The decline in valuation is attributed to advancements in chip manufacturing that require less reliance on ASML’s extreme ultraviolet (EUV) lithography tools. However, analyst Krish Sankar emphasizes that future logic and memory chip generations will increasingly need EUV technologies, particularly in dynamic random-access memory (DRAM) applications, which are currently underappreciated. A notable point of concern for ASML is the adoption of its latest high-numerical aperture (high-NA) EUV machines, with TSMC hesitant to commit to purchasing new equipment, although improving reliability may urge customers to upgrade their technology.
Emerging Markets:
-No update
Commodities:
-Stocks declined further following President Trump's statement rejecting the possibility of a ceasefire, emphasizing the ongoing conflict. Oil prices climbed on Friday, with Brent crude settling at $112.19 a barrel, up 3.3% for the day and 8.8% for the week. West Texas Intermediate rose 2.3% to $98.32, though it faced a slight weekly decline. President Trump's remarks indicated the ongoing conflict may prolong, impacting oil prices, as Saudi officials warned prices could exceed $180 a barrel if disruptions continue. Despite concerns from the Israeli strikes on Iran’s gas facilities, Netanyahu suggested the conflict might conclude sooner than expected. International prices surged amid geopolitical tensions, while WTI futures lagged due to the stability of U.S. oil facilities and possible export bans by the Trump administration.
Streetwise:
-Buyers are increasingly favoring sport-utility vehicles over sedans, leading to a shift among manufacturers towards high-end models. The average price of new vehicles exceeded $50,000 last year, making new-vehicle shopping a privilege for those with higher incomes, with 42% of sales originating from buyers making over $150,000—a significant increase from six years ago. Despite decreased annual sales from 17M pre-pandemic to around 16M, investors remain optimistic, evidenced by significant stock gains for major manufacturers. However, rising gas prices due to geopolitical tensions raise questions about the industry's reliance on internal combustion engines. BofA Securities suggests that demand remains strong, but affordability might become a critical issue as the average new-vehicle buyer's age increases, potentially foreshadowing future market shifts.