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Concerns Hits Stocks Before The New Administration Takes Office
Nvidia unveils a $3,000 supercomputer at CES Las Vegas
INSIGHT WEEKLY: January 12, 2025
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The next newsletter will be on January 26, 2025
🌐 Markets Overview
Markets:
US markets have been declining for about a month after an exceptional performance over the last two years. The recent decline is due to inflation fears and concerns about the likely impact of tariffs to be introduced by the new administration, which may exacerbate inflation.
Good news in the labor market is not good news for borrowers as the Federal Reserve may delay interest rate cuts.
And it's not good news for investors. The stock market had been expecting interest rate cuts to be more frequent, but these hopes are now receding.
The S&P 500, the most widely watched index, declined nearly 3% in the last month.
Magnificent 7:
Meta gained over 5% in the week as analysts re-rated the stock higher. Meta also announced that eBay listings would become available on Facebook in Germany, France, and US.
The Financial Times is reporting that advertisers on Meta’s platform are concerned about the recently announced change of direction at Meta on content moderation. Advertisers may become concerned that their brands may appear next to toxic content.
Apple declined due to its discounting of iPhones in China, Vision Pro’s unimpressive sales performance, not enough customer interest in its new AI features, and a federal antitrust ruling on Google’s payments to Apple for maintaining its premier position for search.
Major Semiconductor stocks:
Micron, ARM gained last week due to AI-related interest.
🇺🇸 US economy
Labor market showed resilience in December by adding 256,000 jobs (up from 227,000 in November), which was higher than expected. The strong labor market shows the strength of the US economy.
Services Purchasing Managers’ Index (PMI) was 54.1 in December, which is two percentage points higher than November, showing an expansion for the 52nd time out of 55 since the pandemic. More good news for the US economy.
Inflation expectations have risen from 3% to 3.3% in the next 5 to 10 years and 2.8% to 3.3% in the next 12 months (source: University of Michigan survey).
The latest (November) inflation numbers are 2.7% (CPI) and 2.4% (PCE).
Interest rate cuts may again be delayed, especially following the strength of the labor market and the risk that inflation could be stimulated. The good news in the economy can mean no interest rate cuts for some time, with some commentators (including Bank of America) thinking there may be no cuts in 2025.
Treasury yields responded by going higher.
The next Federal Reserve meeting on interest rates is scheduled for January 28,29.
S&P500 is -0.9% in the year to date.
🇬🇧 UK economy
Government bonds sell-off as 10-year gilt yields rose to 4.8% due to a more hawkish outlook for US interest rates and as concerns grow over UK debt levels and on public finances.
GBP sell-off in the week The pound has dropped 2.4% against the dollar so far this year.
Growth flatlines as the government seeks ideas on stimulating growth.
Mortgage interest rates are not rising, but the Bank of England expects to cut rates this year.
The next Bank of England meeting on interest rates is scheduled for February 6.
FTSE100 is +0.9% in the year to date.
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🇯🇵 Japan economy
Yen weakened to 158 to the US dollar during the week. Currency weakness has been a concern to Japan and there were interventions in 2024 to support the currency. Again the authorities indicated a willingness to intervene to counter excessive moves.
Nikkei 225 was up 19% in 2024 but declined 1.8% so far this year. Will the Nikkei 225 ever decisively clear its 1989 high?
Upcoming:
The next Bank of Japan meeting on interest rates is scheduled for January 23, 24
See previous spotlight on Japan.
🌐 Artificial Intelligence and Tech
This cover has been designed using assets from Freepik.com
Nvidia presented its latest advancements in artificial intelligence at the CES 2025 event in Las Vegas. CEO Jensen Huang introduced a mini AI supercomputer that costs only $3,000! He said that it can run the entire Nvidia AI stack, and deliver a petaflop of AI performance running off the GB10 Grace Blackwell Superchip.
This is Nvidia’s blurb:
Anthropic Secures Major Funding
Anthropic, an AI company heavily backed by Amazon, is reportedly in advanced talks to secure $2 billion in funding, potentially valuing the startup at $60 billion. This follows a significant valuation increase from $18 billion earlier in 2024, so over a 3 fold increase in valuation within a year! At this new valuation, all seven founders become billionaires.
Its product is Claude, a competitor to ChatGPT.
Synthetic Data gains traction. Nvidia, OpenAI, and Google are leveraging synthetic data to address the rising demand for large datasets used in training AI models. Synthetic data, which is artificially generated, offers a solution to the limited availability of high-quality real-world data. Nvidia highlighted its application of synthetic data for robotics and automotive sectors at CES 2025, combining it with real-world data to enhance AI training. Meanwhile, Google and OpenAI are adopting similar strategies, incorporating synthetic data into their AI systems to overcome data scarcity.
What is synthetic data and why is it useful?
Synthetic data provides an unlimited supply of training data where such data does not exist. For example, in robotics and automotive sectors, Nvidia can simulate millions of road scenarios (e.g., rare accidents or unusual weather conditions) that might be impossible or impractical to capture in real life.
Get your free guide to AI
See the previous spotlight on AI chips
🌐 Crypto Corner
Top 10 cryptos:
XRP, the best performer out of the larger cryptos in 2024, gained over 12% this year on continued optimism of looser regulation and wider adoption by investors, and possible an ETF launch.
Cardano gained over 10%, also due to more interest from investors optimistic about the deregulation and wider interest from funds.
See the previous spotlight on Bitcoin halving
🏅5️⃣ Billionaire Leaderboard
Mostly driven by stock market performance :
Elon Musk (Tesla, SpaceX) $416bn
Jeff Bezos (Amazon) $233bn
Mark Zuckerberg (Facebook/Meta) $212bn
Larry Ellison (Oracle) $196bn
Bernard Arnault and family (LVMH) $169bn
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Stay tuned for more insights and updates each week.