Cover:
-The MSCI China Index has seen an 18% increase this year, making it one of the better performing markets globally. This has led to a rethink among Morgan Stanley's China equity strategists, who upgraded their stance on China stocks to equal weight versus the benchmark. The early tariff salvos have been tamer than feared, fueling expectations that the US and China could spend the coming months in dealmaking instead of skirmishing. This, along with fresh efforts by Chinese officials to backstop the economy, has sparked optimism in a country that many thought was non-investible just a few months ago. Since the fall, Beijing has started to course-correct its approach to healing the economy, unveiling monetary and fiscal measures to put a floor under the economy and domestic market.
Interview:
-Food price inflation has led to a decline in consumer spending and the rise in appetite suppressants like GLP-1 drugs. This has also impacted the demand for restaurants and packaged-food companies. However, investment opportunities remain, particularly in smaller-cap food and restaurant stocks and niche product categories. Jim Salera, an investment bank analyst at Stephens investment bank, shared his insights on Americans' changing appetites and promising companies in the food industry. Salera has been following the food industry since 2019, focusing on small- and mid-cap growth stocks. He shares product trends, including prebiotic soda and notes that the while the outlook for food inflation in 2025 remains uncertain, it has cooled in the past two years. Among his food stock recommendations are Utz Brands, Campbell's, BellRing Brands and Zevia. He also likes Wingstop - a restaurant chain with a simple menu and consistent quality, has a strong franchisee base and strong cash-on-cash returns – and First Watch Restaurant Group, a full-service restaurant that serves brunch, refreshes its menu with popular items while boasting a good labor-retention rate.
Tech Trader:
-Nvidia, the artificial-intelligence chip giant, has surpassed Wall Street expectations in its latest quarterly report, with revenue increasing 78% to $39.3B in the January-ended quarter. The company's data center segment, fueled by AI chip sales, saw revenue nearly double to $35.6B. Nvidia provided solid guidance, projecting revenue for the current quarter to reach a midpoint of $43.0B above the consensus of $42.1B. These growth numbers are impressive, even for the world of technology. Apple, the other technology giant in the $3T market-cap club, grew its revenue by just 4% in the latest quarter. Nvidia trades at 27 times earnings, despite growing 20 times faster than Apple. Blackwell, Nvidia's latest-generation graphics processing unit, generated $11B in revenue, surpassing Nvidia's expectations. Nvidia CEO Jensen Huang said that demand for Blackwell is amazing, as reasoning AI adds another scaling law—increasing compute for training makes models smarter, and increasing compute for long thinking makes the answer smarter. The numbers should alleviate concern from some who believed demand for Nvidia's chips would soften following the release of newly efficient AI models from Chinese start-up DeepSeek.
The Trader:
-The US stock market has seen a decline after soaring in the post-election euphoria. The S&P 500 index is now flat for the year. The US has also been trailing behind major European and Asian equity indexes in 2025 due to concerns about tariffs, layoffs, and other factors. The American exceptionalism narrative may have been overdone, as the pendulum went too far on selling international equities after a strong year for the US stock market in 2024 and weaker performance for the rest of the world. The S&P 500 has fallen 2.5% this week, while the Nasdaq Composite tumbled 5.2%. The Dow Jones Industrial Average escaped relatively unchanged. The case against continued US dominance found more evidence this week, with Nvidia stock dropping 8.5% despite solid earnings, suggesting that the market had gotten too excited about its prospects and those of the Magnificent Seven.
-Formula One's stock, Liberty Formula One, has fallen 3.2% after reporting sales of $1.17B, which fell below forecasts of $1.36B. The stock has fallen more than 10% over the past two weeks, as investors used increased market volatility as an excuse to take profits in a stock that had gained more than 25% over the past 12 months. Formula One isn't simple, as tracking stocks don't give investors direct ownership. John Malone’s Liberty Media has been a fan of tracking stocks, using them in the past for stakes in Sirius XM and the Atlanta Braves baseball team. However, many investors have complained that tracking stocks are too convoluted, and in the case of Formula One, it also represents a 30% stake in concert promoter and Ticketmaster parent company Live Nation. Malone plans to spin off Liberty Live Group into a separately traded company, which will make F1 a cleaner pure-play story. Matthew Harrigan, an analyst at Benchmark, boosted his price target on F1 stock in late December, citing "the removal of a 10% complexity discount" and "the enthusiastic global market for sports assets."
Features:
-Bitcoin and gold share similarities, as they both fall between assets and currencies. They offer protection against inflation and cash, but their fortunes have diverged recently. Bitcoin's price has declined 24% since reaching a record high of over $109,000 on Jan. 20, while gold has continued to rally, gaining nearly 8% in the same span. This contrast highlights the different factors driving the prices of the two assets and suggests that investors looking for a store of value or an alternative investment uncorrelated to the stock market would likely do better with gold over Bitcoin. Eric Wallerstein, chief markets strategist at Yardeni Research, believes gold is a safe haven, with Yardeni seeing gold prices hitting $4,000 by the end of the decade. However, he doesn't maintain a Bitcoin target, as it is a super speculative asset.
-Big-box retailers have lowered their expectations for 2025, with Target, Nordstrom, Best Buy, and Macy's reporting in the coming week. As expected, their 2024 holiday results were solid, but their outlook for the current year was more muddled. Walmart, Home Depot, and Lowe's management teams said they aren't seeing any significant changes in the consumer-spending environment and that spending remains healthy. However, all three companies issued full-year guidance well below Wall Street's forecasts. Companies want to set a low, achievable bar for this year's results, but executives also appear to be baking in at least some degree of demand uncertainty over the next few months. This year's economic has raised concerns, with job growth being weaker than expected in January, the consumer price index spiked, and retail sales slumped. Uncertainty about how the Trump administration's policies, particularly tariffs, will affect the economy has weighed on consumer sentiment and fanned inflation expectations.
Europe:
-Ukrainian President Volodymyr Zelensky and President Donald Trump were supposed to sign a minerals deal, but their meeting at the White House turned into a heated exchange. Zelensky accused Trump of undermining the Trump administration, which is attempting to end the Russia-Ukraine war. Trump told Zelensky that he did not have the cards at the moment, leaving him without a deal. This incident accelerated Trump's campaign to redefine the US relationship with the world, which has included threats of tariffs on Europe and open discussions about absorbing Canada and Greenland into the US. In the short run, Trump's shake-up of US alliances may stimulate the global economy through greater fiscal spending and cheaper energy. However, the longer-run effects of his quasi-imperial ambitions could make it more difficult for US companies to do business globally.
Emerging Markets:
-No update
Commodities:
-Silver's price reached a record high of $49.95 per ounce in 1980, an artificial price due to the Hunt brothers' attempts to corner the market. The price then slid for two decades before reaching its second-highest all-time price of $48.70 in 2011. Today, silver is priced at $32.25 an ounce and would need to increase more than 50% to reach its 2011 peak. Gold, on the other hand, reached a record high of over $2,970 per ounce last week. The gold-silver ratio, which describes how many ounces of silver are required to buy one ounce of gold, stands at 91. The ratio has averaged around 65 since the 1970s and has swung between 40 and 70 in the past century. In March 2020, amid global Covid-19 alarm, the ratio spiked to 125 as investors sought the safety of gold and shied from silver, which is heavily used in manufacturing and technology. A history suggests that a ratio of 90 is meaningful and indicates that silver is undervalued relative to gold.
Streetwise:
-The Consumer Analysts Group of New York (CAGNY) conference in Florida has seen companies like Kraft Heinz, General Mills, and Conagra Brands spend a week discussing their strategies for overcharging for overeating. The conference moved from Boca Raton to Disney World, which is more inspirational for overcharging for overeating. Big Food could use fresh ideas, as the broad US stock market is up smartly over the past year, but shares of these companies have declined. Lingering inflation is pinching family budgets, and consumer confidence dropped sharply in February. Wall Street is worried about trade wars and obesity drugs as a looming threat to the long-term Cookie Monsterization of consumer eating habits. Spice seller McCormick is up 20% in a year, focusing on flavorings rather than sales of flavorings to fast-food restaurants. JP Morgan took a data-driven approach this year, counting topic mentions and comparing with past years.