Closing Jan: DeepSeek’s 2025

Most likely the SP500, GOLD, IEF and Nasdaq will close the month positive which is good for most investors and most of the fund that I manage. The AAA model and the Options Fund will post result shortly. Write me if you would like to know more about those.

The Trump Narrative is quickly changing the market structures, in my opinion, in two instances this week the media was late to report market moving news. X and key user of that platform were clearly faster. We will see how this develop in February.

Today I was recommended a book “Nexus: A Brief History of Information Networks from the Stone Age to AI” which could help understand a bit of the current use of megaphones at current times… I will soon find out.

Back to the Market…

The US stock market experienced significant volatility during this week, with a sharp drop on Monday primarily affecting tech stocks. Now, the market presents a mixed picture, with some stocks recovering and others continuing to face challenges. Let’s review the performance of key tech stocks and analyze the factors influencing their movements.

Stocks That Rebounded

Several tech stocks have shown resilience and rebounded since the initial drop:

1. Apple (AAPL): Up 1% after surpassing expectations in both revenue and earnings3. The company’s AI-driven initiative, Apple Intelligence, appears poised to be transformative3.
2. Meta Platforms (META): Gained 1.9% and reported better-than-expected results as its spending on AI grows significantly720.
3. IBM: Up 12% after showing a significant increase in its generative AI business in the fourth quarter20.
4. Atlassian (TEAM): Surged 17% after reporting strong quarterly earnings9.

Stocks That Continued to Struggle

Some tech stocks have not yet recovered from the initial drop:

1. Nvidia (NVDA): Despite a slight recovery, it initially lost nearly $600 billion in market value in a single day – the biggest one-day loss in US history1.
2. Microsoft (MSFT): Down more than 4% despite reporting results that topped analysts’ expectations, as revenue in its Intelligent Cloud segment came in light20.
3. Tesla (TSLA): While up about 1% recently, it initially fell 2.3% as part of the broader DeepSeek sell-off4.
4. Broadcom (AVGO): Initially dropped 17.4%, though it has shown some signs of recovery1.

Factors Influencing Stock Performance

1. DeepSeek’s AI Model: The release of DeepSeek’s efficient AI model sparked concerns about US leadership in AI and the amount of money large companies are spending to develop the technology58.
2. Earnings Reports: Companies like Apple, Meta, and IBM saw positive stock movements due to strong earnings reports320.
3. AI Investments: Investors are closely watching companies’ AI strategies and their impact on financial performance20.
4. Market Sentiment: Despite the volatility, the overall market sentiment remains cautiously optimistic, with the S&P 500 and Nasdaq showing signs of recovery20.

Conclusion

The tech sector’s volatility highlights the ongoing impact of AI developments on market dynamics. While some companies have rebounded due to strong earnings and AI initiatives, others continue to face challenges. As the market adjusts to new AI advancements and their potential implications, investors should remain vigilant and monitor both individual company performance and broader industry trends.

A week since DeepSeek: AAPL UP, NVDA DOWN, MSFT DOWN, AMZN UP, AVGO DOWN and META UP pic.twitter.com/Yjy43CItuj

— Mario Randholm (@MarioRandholm) January 31, 2025

About the FED and Chairman, soon we will find out how really independent they are, the economy is strong and the market expensive and both should get stronger and more expensive if the Fed does nothing.

Here are the key points from their last meeting:

Interest Rate Decision

The Federal Open Market Committee (FOMC) decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent[1][2]. This decision came after three consecutive rate cuts in previous meetings, which had lowered the benchmark rate by a full percentage point[2].

Economic Assessment

1. Overall Economy: The Fed noted that economic activity continued to expand at a solid pace, with GDP rising above 2% in 2024[2].
2. Labor Market: Conditions remain solid, with payroll job gains averaging 170,000 per month over the past three months. The unemployment rate stabilized at 4.1% in December[2].
3. Inflation: While easing significantly over the past two years, inflation remains somewhat elevated relative to the Fed’s 2% longer-run goal. Total PCE prices rose 2.6% over the 12 months ending in December, while core PCE prices rose 2.8%[2].

Policy Stance and Future Outlook

1. The Fed emphasized a balanced approach, stating they are attentive to risks on both sides of their dual mandate[2].
2. Chair Powell indicated that with the policy stance now less restrictive and the economy remaining strong, there is no hurry to adjust the policy stance further[2].
3. The committee will assess incoming data, the evolving outlook, and the balance of risks in considering future adjustments to the target range[2].

Additional Notes

1. The Fed began discussions on its five-year review of monetary policy framework, scheduled to conclude by late summer[2].
2. The meeting marked the first significant decision under President Trump’s second term, with some attention on his previous comments about wanting a say in Fed policy[3][5].

The Fed’s decision to hold rates steady reflects a cautious approach as they navigate between controlling inflation and supporting economic growth in an evolving political and economic landscape[5][8].

Citations:
[1] https://www.federalreserve.gov/newsevents/pressreleases/monetary20250129a1.htm
[2] https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20250129.pdf
[3] https://edition.cnn.com/business/live-news/fed-meeting-january-01-29-25/index.html
[4] https://www.americanbanker.com/live-blog/live-coverage-of-jerome-powells-january-2025-federal-open-market-committee-press-conference
[5] https://www.nbcnews.com/business/economy/federal-reserve-interest-rate-decision-january-2025-what-to-know-rcna189628
[6] https://www.nytimes.com/live/2025/01/29/business/fed-interest-rates
[7] https://www.reuters.com/markets/rates-bonds/view-fed-stands-pat-leans-hawkish-with-omission-inflation-progress-reference-2025-01-29/
[8] https://argentfinancial.com/argent-insights/post-fomc-thoughts-january-29-2024/
[9] https://www.youtube.com/watch?v=7YxynbbASMA