- Looking Ahead: As the week begins, the market’s attention will be on the fallout and potential escalation of newly announced tariffs. Meanwhile, the monthly employment report is set for release on Friday, and the earnings season remains in full swing with several major reports ahead.
- Last Week: Despite sharp market swings, the U.S. stock market ended last week with only slight losses, as Nvidia’s record selloff and tariff announcements created volatility but did not derail overall resilience. Economic data was mixed, with inflation staying in check but GDP growth coming in softer than expected. The Fed held short-term rates steady and longer-term bond yields edged lower.
- January: It was another solid month for investors and globally diversified portfolios. Historically, a strong January has often signaled strong returns for the rest of the year.
Looking Back to Last Week
It was quite a week—a true testament to the market’s resilience, navigating Monday’s DeepSeek (“cheaper AI”) news and Friday’s tariff remarks from the President. Despite these bookends of initially negative news, and a week of sharp losses and big gains, the overall weekly returns ended up relatively muted. The U.S. stock market posted a slight loss, led by declines in large-cap growth and tech stocks. Nvidia and other semiconductor companies struggled—Monday’s decline in NVDA was the largest single-day loss in market cap (~$600 billion) for any stock in history, bringing Nvidia down nearly 16% for the week.
The primary driver of Nvidia’s selloff was concern that DeepSeek’s AI technology could undercut its dominance with “cheap AI.” Reports claimed DeepSeek’s offering was 1/45th the cost of current AI models—though those numbers are debatable, the news sparked questions about whether too much capital has flowed into the AI trade. As with any disruption, there are winners and losers. While the DeepSeek news hurt Nvidia, it boosted companies like Apple and Meta, both of which saw strong gains.
Then came Friday when President Trump announced plans to impose tariffs on Canada, Mexico, and China. By Saturday, he had formalized the measures: a 25% tariff on nearly all imports from Canada and Mexico, a 10% tariff on energy products from Canada, and a 10% tariff on China, set to take effect Tuesday.
Economic data was mixed. On the positive side, inflation remained in check, with Core Personal Consumption Expenditures (PCE) coming in at 2.8% (headline) and 2.6% (core), showing no major surprises to the upside. That is a modest win for the bullish case. However, Q4 GDP growth came in at 2.3%, below the expected 2.5%-3.0% range. Markets have moved higher over the past year largely due to stronger-than-expected growth, so this softer number warrants watching. That said, the average GDP growth rate over the last 20 years has been 2.0%, meaning this print is still above trend.
In the bond market, the Fed held rates steady last week as expected. Their next meeting is in March, and for now, markets do not anticipate any changes to short-term rates. Meanwhile, long-term rates edged slightly lower, with the 10-Year Treasury yield ending at 4.57%.
Looking Ahead to This Week
This week is set to be eventful, with markets responding to new tariffs and the potential for escalating trade tensions—likely driving financial headlines and market movements. As always, there will be both winners and losers. On a macro level, conventional wisdom suggests tariffs could add inflationary pressure and lower economic growth, though the full impact remains uncertain.
Earnings season continues, with over 100 S&P 500 companies set to report, including Amazon. While last week’s earnings results were mixed, this quarter is still on track to being the strongest in three years, with projected year-over-year earnings growth of 13%.
On Friday, we get the monthly employment report. Expectations are for 150k new jobs (down from 256k last month) and an unemployment rate of 4.1%, unchanged from December.
Looking Back at January
Despite market volatility, the U.S. stock market ended the first month of 2025 up more than 3%. Within the U.S., value stocks outperformed growth, while mid- and small-caps led over large-caps. Developed international equity markets (MSCI EAFE) topped all asset classes, rising over 5% in January. Commodities also delivered strong returns, gaining 4% for the month, while core fixed income and diversifying asset classes—including global credit, alternatives, and real assets—finished in positive territory. Overall, it was a solid month for investors and globally diversified portfolios. Historically, a positive January has often signaled stronger performance for the remainder of the year compared to years that started with losses.
Closing Thoughts
The week ahead promises to be pivotal, providing greater insight into corporate earnings, economic conditions, and, most notably, the impact of new tariffs. While uncertainty persists, there are reasons for cautious optimism—earnings growth remains solid and economic data is resilient. That said, markets are rarely a smooth ride and rarely move in a straight line.
As always, we believe that staying invested, diversified, and disciplined is the most reliable way to achieve long-term financial goals. If you have any questions, feel free to reach out at strategists@brinkercapital.com or at rusty@orion.com. Thank you for your time and trust.