Cover:
-The first three weeks of President Donald Trump's second term have been marked by mixed signals in the stock market, with tens of millions of Americans believing Trump is God's gift to their country and tens of millions more loathe him. This has made defining Trump "impartially" difficult or rendering that word obsolete. In the 18 days since Trump took office, the S&P 500 has seen a 1.4% increase, compared to an average 0.9% return for all presidents' first 18 days in the White House since 1929. Shares of companies such as Baker Hughes, Netflix, JPMorgan Chase, and Walmart were among the 213 stocks making 52-week highs on Thursday, reflecting that Americans who voted for Trump are mostly happy with him. This makes sense, as they voted for a Disrupter in Chief, not someone to break bread with Mitt Romney, Chuck Schumer, or even the Business Roundtable. Another boost to the market may be belief in the "Trump put," which presupposes that if stocks tank in response to policy moves made by the president, he will retract said policy.
Interview:
-The Economic Policy Uncertainty Index is at its highest level since 2020, and many equity valuations and bond yields are at their highest levels. However, CEO George Gatch of J.P. Morgan Asset Management, a unit of JPMorgan Chase, believes that timing markets is the wrong move. Gatch spoke to Barron’s and he suggests that time in markets is more important than timing markets. Gatch, a 39-year J.P. Morgan veteran, has experienced market cycles and a regulation- and technology-driven revolution in asset management, leading to new investment strategies and products, including many that bundle traditional and risk-mitigating assets. J.P. Morgan Asset Management, which oversees $3.6 trillion in global assets, has many more such products on the drawing board.
Tech Trader:
-Big Tech companies like Amazon, Microsoft, and Google parent Alphabet have reported impressive numbers, but their stocks fell due to slight cloud misses. Meta Platforms' stock soared, but it has no public cloud to rain on the parade. The earnings reports indicate that the breathtaking pace of capital expenditures for AI data centers will continue in 2025, raising the bar across Big Tech, especially for the cloud. Amazon, which pioneered the public cloud category with Amazon Web Services, sees roughly 20% annualized growth from its AWS cloud business, down from over 50% five years ago. Google and Microsoft may be experiencing a similar trend, with Google Cloud Platform and Microsoft Azure growing 30% annually but suggesting growth may be decelerating. Cloud softness feels particularly acute, with tech companies spending heavily to build out artificial-intelligence capabilities.
The Trader:
-Renewables were not included in President Trump's "energy emergency" executive order, despite being the fastest-growing and cheapest sources of electricity in several parts of the country. Trump's rhetoric and actions have impacted clean-energy projects, leading to some companies pulling out of them. He issued a 90-day pause on federal permits and paused loans and grants issued by the Biden administration, upending existing projects. A judge has stopped the order from taking hold for now, though the spending pause may come back. However, there have been some hopeful signs in the renewables space, with French energy giant TotalEnergies stating the US is still an attractive market and plans to continue investing in renewables. Enphase Energy, which makes technology for controlling solar panels on homes, beat analysts' earnings expectations and reported a 6% increase in US revenue. CEO Badri Kothandaraman believes that Trump and the Republican Congress will not completely do away with support for solar, especially given Elon Musk's positive comments. Enphase is also producing a significant share of its products in the US and plans to double down on manufacturing. Wind power is also optimistic, although Trump's distaste for wind has been well-documented. Offshore wind projects are in trouble, but onshore wind installations are on track to increase 31% this year. Shell has withdrawn from a significant East Coast wind project and New Jersey has canceled a solicitation for offshore wind power. However, onshore wind installations are expected to rise 31% this year, with less reliance on federal environmental permits and leases.
-The stock market has been experiencing a downward trend, with the S&P 500 index dropping 0.2% this week, while the Dow Jones Industrial Average and NASDAQ Composite fell 0.5%. The market appeared unaffected by newsworthy announcements from the new administration, such as the dismantling of the US Agency for International Development and Trump's plan to occupy and rebuild Gaza. However, tariff news shook investors, with threats against Canada and Mexico and Trump promising reciprocal tariffs against countries imposing levies on US goods. Headline whipsaws have become commonplace since the start of the year, and investors are getting "chopped up by chasing headlines." The news outside of the administration is not particularly bullish at the moment. In between the tariff talk, corporate and economic news was mostly downbeat, with Amazon and Alphabet announcing disappointing guidance and monthly jobs numbers slightly weaker than expected.
Features:
-Trump's plans to impose higher tariffs have sparked concerns about rising prices, potentially affecting the Federal Reserve's goal of reducing inflation to 2%. Fed officials predict a soft-landing scenario where inflation subsides without a recession, but if confidence falters, inflation pressures could rise. The Trump administration has levied a 10% tariff on imports from China and plans to impose 25% duties on products from Mexico and Canada if no agreement is reached. The latest data shows a decline in consumer sentiment and a surge in inflation expectations, which could pose challenges for central banks in restoring price stability without causing harm to the labor market.
-Chinese AI platform DeepSeek has sparked a frenzy among the Chinese government, media, rival tech firms, and the country's rapidly expanding AI user base. The start-up claims its new version matches OpenAI's best model at a fraction of the cost and without access to advanced semiconductor chips. Based in Hangzhou, China, DeepSeek made its models open source, allowing anyone to harness and alter the product for their own use. Competitors are racing to show they have cutting-edge models, but their stocks have risen and their forecasts have brightened. This is partly due to the unproven assertion that DeepSeek used less advanced Nvidia chips and spent a mere $6 million in its final training round.
Europe:
-The Bank of England (BOE) has cut interest rates, following a decline in economic growth outlook, a move different from the Federal Reserve's approach. The UK central bank lowered its key rate to 4.5% from 4.75%, as expected, but two policymakers voted for an even larger half-point cut. This pushed the pound down against the US dollar, sending it 0.9% lower to $1.238. The BOE said a gradual and careful approach to the withdrawal of monetary policy restraint is appropriate. Catherine Mann, a hawkish member of the rate-setting panel, supported a bigger cut, while Swati Dingra, who has a record of supporting lower rates, dissented. The BOE decision follows a quarter-point cut from the European Central Bank in Frankfurt.
Emerging Markets:
-No update
Commodities:
-Gold prices have risen to a record price of just under $2,900 an ounce, indicating that investors remain on edge despite the recovery from President Donald Trump's tariffs. UBS analysts raised their gold forecast for the next 12 months to $3,000 an ounce, citing gold's enduring appeal as a store of value and hedge against uncertainty. The US has postponed tariffs on Mexico and Canada, and China's relatively constrained retaliation for new tariffs levied against it, providing some relief for markets. However, analysts predict that significant tariffs against the US neighbors won't last long and that tariffs on China will be gradually increased. Gold has room to rise due to elevated uncertainty, an extension of the global rate-cutting cycle, and strong investor and central bank demand. International tensions will remain regardless of U.S. trade policy, with the ongoing Russia-Ukraine war, Middle East conflict, and Trump's efforts to curb Iran's oil exports. Lower interest rates make gold more appealing as they reduce the returns investors forgo by holding assets that don't pay interest.
Streetwise:
T-Mobile stock has seen a 54% increase in a year and 694% increase over the past decade, surpassing Amazon.com, Meta Platforms, and Alphabet and Apple. The 2020 merger between T-Mobile and Sprint may have turned the industry into a lucrative triopoly, but antitrust issues may have played a role. T-Mobile's frothy stock price of 23 times this year's projected earnings might be worth it, but parent Deutsche Telekom offers a cheaper way in. A decade ago, Verizon Communications and AT&T controlled 72% of US national cell service, with T-Mobile and Sprint splitting the rest. T-Mobile was slowly gaining market share due to better deals and Sprint's stagnation. The growth mismatch between T-Mobile and Sprint led to T-Mobile running low on wireless spectrum, while Sprint had plenty. In 2018, T-Mobile announced its intention to buy Sprint for $26.5B, but antitrust regulators challenged the deal. In 2019, T-Mobile had to sell its Boost prepaid cellphone service and some spectrum to Dish to create a new, fourth industry competitor.