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Daily Stock Market Articles

Discussion in 'Stock Market Today' started by bigbear0083, Mar 17, 2023.

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    A Discerning Sell-Off
    Tue, Jan 28, 2025

    In listening to discussions over the market's reaction to the DeepSeek sell-off yesterday, the term "shoot first, ask questions later" came up repeatedly. However, in looking at the performance of various indices and individual stocks yesterday, the market's behavior looked more discerning than indiscriminate. At the individual stock level, most stocks in the S&P 500 finished the day higher, and the weakness was concentrated to stocks that have benefitted the most from the AI rally.

    The chart below shows yesterday's performance of major US index ETFs. As you would expect, the Nasdaq 100 with its concentration in technology was the hardest hit, falling by close to 3%. The cap-weighted S&P 500 (SPY) also declined more than 1% given its large weighting in Nvidia (NVDA) and other tech companies. The equal-weight index (RSP), however, finished the day in positive territory with a modest gain. The one index where performance was not as we expected was in small caps where the Russell 2000 (IWM) also fell nearly 1%. On a day when mega-cap tech was crushed but the majority of large-cap stocks rallied and interest rates declined, we would have expected small caps to show more strength. Given the entire Russell 2000 is smaller than NVDA, it doesn't take much to get this area of the market to rally. Also, if DeepSeek means that the previous costs associated with adopting AI are now dramatically lower, shouldn't that be good for small caps which presumably have smaller budgets?

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    Looking at the performance of these major index ETFs over the last week, outside of QQQ, they're all still positive, even after Monday's decline. Additionally, they're also all trading right within the confines of their normal trading ranges (none are oversold or overbought) which is a level of homogeneity that it feels like we don't see much these days.

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    The Russell 2000's lack of a rally came within the context of a week-long period where IWM has been unsuccessfully attempting to break back above its 50-DMA. Yesterday marked the fifth straight day where it tested that level but failed to close above it.

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    The mid-cap ETF (MDY) finished well off its intraday high yesterday and also traded below its 50-DMA but managed to close the day just barely above that level.

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    The 50-DMA also acted as support for the S&P 500. After opening right at that level in the morning, the large-cap benchmark bounced throughout the session and finished at the highs of the session.

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    The chart of the Equal Weight S&P 500 (RSP) over the last few days looks similar to small caps with a tight range. The only difference is that, unlike IWM, RSP has closed above its 50-DMA for each of the last four trading days.

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    Finally, the Nasdaq 100 (QQQ) was the biggest pain point of the major indices. It started the session below its 50-DMA and made an attempt to rally back above that level intraday but came up just short by the time the closing bell rang. While QQQ failed to take out its December high in last week's rally, it did manage a higher high, and as long as yesterday's decline doesn't see much in the way of follow-through, it isn't in imminent danger of a lower low in the short-term.

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    New York Home Prices on Top
    Tue, Jan 28, 2025

    Updated home price data from S&P CoreLogic Case Shiller was published this morning through the month of November 2024. Below is a summary table of key results across the 20 cities/regions tracked by Case Shiller.

    Most cities saw home prices decline month-over-month from October to November, with San Francisco and Seattle down the most at roughly -0.75%. Boston, Miami, and New York were the only cities that saw meaningful gains month-over-month.

    Over the prior year, 19 of 20 cities were up, with Tampa the only city down at -0.37%.

    New York ranks first when it comes to year-over-year price gains at +7.32%.

    After a major jump in home prices in the immediate aftermath of the pandemic, we saw a small dip in 2022 and 2023 when risk assets sold off hard. Since early 2023 lows, New York is also the city that has seen home prices jump the most at +16.76%.

    Additionally, New York is now the only city where home prices are currently at all-time highs. On the flip side, San Francisco, Seattle, and Denver are all down more than 5% from all-time highs.

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    Below is a historical look at Case Shiller home prices for the 20 cities tracked along with the composite indices. We've highlighted New York in green because it's the only city where prices are at all-time highs.

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    DeepSeek: Did China Just Eat America’s AI Lunch?
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    DeepSeek, a small Chinese Artificial Intelligence (AI) startup, shook the AI world last weekend. In short, DeepSeek created an AI model that appears to be as powerful as the existing ones out there. And most importantly, they did it with much less money. DeepSeek’s AI chatbot also soared to the top of the Apple App store, overtaking OpenAI’s ChatGPT.

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    Until now, it looked like there would just be a handful of mega tech companies able to compete in the AI space: Microsoft-backed OpenAI (with ChatGPT), Alphabet (Gemini), and Amazon-backed Anthropic (Claude). The thinking was that only these companies had the immense technological and financial resources required. And subsequently, they would be able to monetize AI by charging users who wanted to use these proprietary, “closed source” AI platforms.

    Well, DeepSeek just upended this.

    The good news is that costs are likely going to be much lower for AI, which is likely to pull in a lot more users. But one person’s spending is another person’s revenue (and profits). So, falling prices means companies providing the AI infrastructure could potentially lose out. Of course, there’re huge open questions, including:
    • Are the Chinese ahead of the US in AI?
    • Do US firms continue to spend billions on capex (and chips)?
    • Which firms are the winners and the who are the losers?

    A Deep, But Not Broad, Sell-Off
    The uncertainty over the answers to these questions led to a big selloff in tech stocks on Monday. The market seemed to think the companies providing the backbone of AI infrastructure are the immediate losers. Semiconductor stocks got hammered. NVIDIA shares fell 17.0%, losing almost $600 billion in market cap and going from the most valuable company in the world to 3rd place. Other semiconductor firms that lost out included Broadcom (-17.4%), Marvell Tech (-19.1%), and AMD (-6.4%).

    Even power companies saw big pullbacks. Constellation Energy fell 20.9% — they inked their largest power purchase agreement with Microsoft last year, agreeing to restart the Three Mile Island nuclear plant to provide power to Microsoft for AI workloads. Talen Energy, which signed a deal to provide nuclear power to Amazon, fell 21.6%.

    However, the sell-off was mostly confined to the technology and utilities sectors. A few large technology companies gained, including Apple (+3.2%), Meta (+1.9%), and Amazon (+0.4%). As you can see from this Finviz heatmap, there was a lot of green on the board. 350 stocks in the S&P 500 actually gained.

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    All said and done, this wasn’t a broad-based sell-off. Far from it. The S&P 500 fell because of its huge weight to NVDIA and Microsoft, but the Dow gained 0.65%. It goes to the point that DeepSeek likely makes widespread AI use even more likely, and perhaps sooner rather than later as the cost of AI infrastructure collapses. But let’s walk through DeepSeek itself, putting its announcement within the context of the global macroeconomy.

    Who and What Is DeepSeek?
    The company was founded by a quantitative trading firm in China, one of China’s largest (they had $15 billion of assets in 2015, but this dropped to $8 billion by 2021). The founder of the trading firm, Liang Wenfeng, went into AI research two years ago in May 2023 — apparently with 10,000 NVIDIA chips they had acquired by 2021, before export controls were imposed by the US. They also pulled together the smartest young Ph.D.s across China’s top universities.

    DeepSeek has been releasing several large language models (“LLM”) over the last few years. These LLMs are what drive chatbots like ChatGPT. So, they didn’t “come out of “nowhere.” But on Christmas Eve last year (2024), they introduced DeepSeek-V3, which by itself was impressive as it matched ChatGPT & Gemini’s capabilities. They also released a key paper, highlighting how they built the platform using only a fraction of the chips the US AI companies use to train their models. DeepSeek used ~ 2,000 NVIDIA chips, whereas the big US firms use ~ 16,000 chips or more. DeepSeek said they needed only $6 million in raw computing power to train their new system, about 10 times less than what Meta spent building its latest AI model! Interestingly, the DeepSeek paper had a whopping 139 technical authors – that’s a huge technical team. This is not a tiny group working in a Chinese basement.

    DeepSeek-V3 could do standard issue stuff, meeting benchmark tests, including answering questions, solving logical problems, and writing computer code. But earlier this month, OpenAI released OpenAI-o3. It’s designed to reason through math, science, and coding problems — something V3 could not do. But last week, on January 20th, DeepSeek released DeepSeek-R1, a significantly more advanced reasoning model, which impressed experts. That is what sent US investors into panic, albeit only after digesting the information over the weekend. Note that OpenAI is yet to release o3 widely, but it’s supposed to be very impressive — meaning America likely “hasn’t lost its lead” in AI. But things are close.

    How Did DeepSeek Get Around Technological Constraints?
    Under the Biden administration, the U.S. had limited Chinese companies access to advanced chips, though this started only in October 2023. Still, DeepSeek’s researchers had to get more creative, and use what they had more efficiently. And turns out they did. Here’re a couple of examples.

    Traditional AI models rely on supervised fine-tuning, whereas DeepSeek uses reinforcement learning, i.e. models learn through trial and error, and self-improve (incentivized by algorithmic rewards). This is similar to how humans learn from experience, by interacting continuously with others and their environment, and receiving feedback. This allows development of reasoning abilities and better adaptation.

    DeepSeek uses something called “mixture of experts” (MoE) architecture, activating only a limited fraction of parameters to solve a given task. Think of a team of experts, with different specialties. When asked to solve a task, only relevant experts are used. Which is essentially what DeepSeek does, leading to significant cost savings and better performance.

    These relatively creative approaches (amongst others) reduced computational resources needed for training. Leading to much lower costs. Contrast all this to brute-force scaling that typically occurs at American companies, mostly because they can afford to, as vast resources are available (money and chips).

    DeepSeek is also open source, without licensing fees, leading to community-driven development. Developers can access, modify, and deploy DeepSeek models for free, promoting wider adoption of the models. And it also allows for transparency and accountability.

    Some highlights of DeepSeek
    • It’s open source, with the goal of eventually giving everyone access to Artificial General Intelligence (AGI). They’re the only advanced AI team releasing cutting-edge research
    • The chatbot is free, with no ads, and it appears to be as good as the other chatbots
    • It allows you to see how it’s “thinking” as it gives you an answer. Not to mention it helps you understand, and trust, the answer more. It also helps you tailor your queries and get to better results
    • The API pricing is lot lower than competitors. The R1 API costs $0.55 per million input tokens (versus $15 for ChatGPT) and $2.19 per million output tokens ($60 for ChatGPT).

    What Next?
    At the end of the day, you still want to have more chips than less, since it’ll allow for faster utilization and inference. Also, the wider use case of AI, as costs plunge, could lead to more demand. This is called as “Jevon’s Paradox”. When technology advances, it makes a resource much more efficient to use. But as the cost of the resource drops, demand increases, causing resource use to increase. In fact, Microsoft’s CEO, Satya Nadella, tweeted this after the DeepSeek news, saying as AI is commoditized, we’ll need much more of it (some of this could also be cope).

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    What could end up happening is even more capex spending on AI, including on chips. In which case stock prices for chip companies that got hammered should recover, although the timing of demand could be different. But at this point, it’s likely too early to tell. Also, a lot of companies aren’t just selling the AI infrastructure. Companies like Apple, Amazon, and Meta are potential users of AI. These companies will likely benefit from the lower cost of AI.

    Ban DeepSeek?
    As I noted above, DeepSeek is open source. Which means it cannot be banned, unlike something like TikTok. Of course, the chatbot that surged to number 1 on the Apple app store can be banned. But the DeepSeek API can be downloaded and run “locally” on one’s own computer, or be accessed via API. Which is why the “gotcha” questions folks have been asking DeepSeek are irrelevant. DeepSeek chatbot doesn’t provide answers to questions about Tiananmen Square and other issues disfavored by the Chinese government. But this is just the chatbot, and that’s subject to Chinese censors. As Joe Weisenthal at Bloomberg pointed out, the open source version of DeepSeek that you can download and run is not censored — you can ask it whatever you want.

    China Is a Tech Powerhouse, That’s Already Eaten Everyone Else’s EV Lunch
    There’s a notion that China is a central command and control economy, and puzzlement about their technological prowess. But this hides some important details about how China works. The central government, and CCP (Chinese Communist Party), certainly has a lot of say in the economy. But it’s mostly via setting targets for spending, and even GDP, which is why GDP growth in China is an “input,” as opposed to an output, of natural economic activities. Especially important is the fact that the government facilitates this with “industrial policy,” including significant subsidies and cheap state financing for entire sectors like hi-tech manufacturing. This is combined with protectionist policies that prevent foreign competition.

    However, at the ground level, competition for the money is intense. A good example is the electric vehicle industry, which has benefited from massive subsidies from the Chinese state, giving domestic firms a massive leg up over Western companies that don’t benefit from subsidies. Yet, there are over 100 EV companies intensely competing with each other. A true market economy wouldn’t be able to support them all. But generous government funding supports them, allowing scalability. While also dropping costs significantly.

    China’s subsidies also went toward building out the local supply chain, and so Chinese companies don’t rely on imported parts. Chinese EV juggernaut, BYD (which Warren Buffet has a stake in), has a mostly local supply chain that gives it a big leg up. Even for Tesla, 90% of the parts for its Shanghai factory are sourced from within China.

    I’ve previously written about how China has taken over the global auto manufacturing sector in under 5 years. China exported 6 million cars in 2024. It was under 1 million 5 years back in 2019.

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    China now has enormous capacity to produce cars — over 40 million internal combustion engine (ICE) cars a year, and about 20 million electric vehicles (EVs) by the end of 2024. This means China has the amazing capacity to supply over half the global market for cars. Globally, about 90 million cars are sold a year.

    Brad Setser (an economist at the Council of Foreign Relations) points out that China has nothing close to this level of internal demand. The internal market is about 25 million cars, and it’s not growing. Interestingly, domestic EV sales are rising rapidly (expected over 15 million next year). And as a result, ICE vehicle capacity is geared to exports — especially to Europe and other EMs (the US and India are notable exceptions because of tariffs imposed on Chinese vehicles). And China’s massive overcapacity is a revolution for the global manufacturing and auto industry.

    What Exactly Is the China Threat
    Real GDP growth clocked in at 5% in 2024 for China, right at the government’s target. But make no mistake, this is a slowdown and the underlying details aren’t pretty. Retail sales, a proxy for consumption, was up just 3.7% in 2024, well below the pre-pandemic pace of 8%. On the other hand, subsidies for the manufacturing sector led to industrial production rising over 6.2% in 2024, matching what we saw pre-pandemic.

    China essentially has 3 solutions to its underlying economic slowdown
    • One, accept it and the lower employment it brings, but this also brings political peril
    • Two, recharge the crashing property sector with debt, but they’re reluctant to do this
    • Three, promote the industrial sector and boost exports, while limiting imports, which is what they’re doing
    Chinese exports grew by 6% in 2024, but imports rose just 1%. As a result, the trade surplus has surged by a whopping 21%, to almost $1 trillion. In short, China is selling stuff to the rest of the world all over the world. But they’re not buying goods in return (a lot of these are EV exports). It also tells you that globalization has not really declined over the last several years. The world is even more reliant on Chinese supply today than 5 years ago, before Covid.

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    The problem is that China’s policies impact trade partners in a “beggar-thy-neighbor” way. Chinese over-production leads to a collapse in price, threatening profits for companies abroad, let alone the manufacturing industry in other countries. Global manufacturing may remain in a funk due to Chinese overcapacity, along with continued subsidies for the Chinese industrial sector. And manufacturing-dependent economies in particular will continue to struggle. A good example of this is happening now with the German auto industry.

    Focus On the Big Picture
    Manufacturing is not a big part of the US economy. But China could be coming for US tech now. DeepSeek’s advances shows that China’s advancement is a threat to US technology companies. And tech is an important industry for the US, not least because it matters for the stock market (more so because of current levels of concentration), and household balance sheets which have strengthened partly on the back of stock market gains (as we wrote in our Outlook 2025).

    But US companies are not out of the game. Not by a longshot. As I mentioned earlier, you’d still rather have more chips than less. And the closed nature of US companies means we don’t know the extent of their AI advances. OpenAI and Google may not have released their “latest and greatest” models to the public. Famed venture capital investor Marc Andreeson noted on X that DeepSeek-R1 is AI’s Sputnik moment. I disagree. When the Russians launched Sputnik in 1957 (earth’s first orbiting artificial satellite), America was well behind the curve. But it caught up in a year (launching Explorer 1 in 1958). Now, it’s actually the Chinese who appear to have caught up.

    A lot of the focus right now is on the winners and losers within the context of DeepSeek’s release. That’s a tough game to play, and thankfully one that we don’t really have to — the market will figure it out. The big picture is that AI is now going to diffuse into the economy much faster, thanks to lower cost. If anything, US companies are likely to ramp up spending on AI even more and recall what I said about one person’s spending being another person’s revenue and profits. That’s ultimately going to be a good thing for the economy, and productivity too. A huge ramp-up in capex can lead to potential problems down the line, but I’ll focus on that another day.

    I get the question about “how to invest in AI” all the time. There’s plenty of good managers out there (including at Carson) that focus on that. But the reality is that tech (and tech-adjacent) companies make up a significant portion of the broad S&P 500 index (close to 35-40%). That’s a pretty big bet right there, and the question is whether you want that big of a focused bet, let alone whether you want to add to it.

    Even before the DeepSeek news that led to the Monday selloff, there was a good case to be made for diversifying within equities, into areas like mid/small cap stocks and sectors outside tech, to reduce concentration risk. We wrote in our 2025 Outlook that we expect the bull market to broaden out this year based on the fundamentals of the economy and policy opportunities. Our view was that there’s good reason to diversify outside of Tech even prior to this latest news (we’re neutral on tech, not underweight). There’s nothing that’s changed that outlook, and if anything, what’s happened this week has perhaps solidified it.
     
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    Year of the Snake? More Like Year of the Bear
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    “Bulls make money, bears make money, and pigs get slaughtered.” -Old Wall Street saying

    We already had our New Year here in the United States, but the Chinese New Year begins today and with it brings the Year of the Snake. The snake is the sixth of the twelve-year cycle of animals that appear in the Chinese Zodiac. Although snakes don’t have a positive connotation in the US, in Chinese culture they have positive symbolism. For example, they are regarded as little dragons and the skin snakes shed is referred to as the dragon’s coat, symbolizing good luck, rebirth, and regality.

    Although we would never suggest investing based on the zodiac signs, it is interesting to note that the Year of the Snake has historically been quite weak for stocks. We noted last year why horned animals tended to be bullish and that played out quite well last year with the Year of the Dragon .

    The 12 zodiac signs appear in the following order: Rat, Ox, Tiger, Rabbit, Dragon, Snake, Horse, Goat, Monkey, Rooster, Dog, and Pig. Each sign is named after an animal, and each animal has its own unique characteristics. Someone born during the Year of the Snake tends to partner well with an Ox or Rooster, but things don’t mesh so well with Tigers or Pigs.

    Since the Chinese New Year typically starts between late January and mid-February, we looked at the 12-month return of the S&P 500 starting at the end of January dating back to 1950. And wouldn’t you know it? The Year of the Snake has been up only three out of six times and up an average of less than 1%. Additionally, stocks have alternated between higher and lower since 1953, suggesting this could be a down year.

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    Here’s how all 12 signs have done since 1950. Historically, the snake is indeed the worst sign, with the Rooster the second weakest. Turns out the Year of the Goat has the strongest returns (maybe there’s something to that “greatest of all time” acronym), but you’ll have to wait till 2027 to see that one again. Next year is the Year of the Horse, which hasn’t been all that strong either. Lastly, we found it amusing that animals with horns saw some of the best returns, with last year’s horned Dragon a good one for the bulls. I did a little more research and it turns out that some snakes have horns, so maybe all hope isn’t lost just yet!

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    This is all in good fun and of course in no way should you invest based on zodiac signs. For more of our real-time thoughts on DeepSeek, AI, the tech collapse, and more, be sure to read what Sonu Varghese, VP Global Macro Strategist, had to say in DeepSeek: Did China Just Eat America’s Lunch?
     
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    February historically worst month for S&P 500 and NASDAQ in post-election years
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    February is in the middle of the Best Six Months, but its long-term track record, since 1950, is not impressive. February ranks no better than sixth and has recorded meager average performance, with one exception, Russell 2000. Small cap stocks, benefiting from “January Effect” carry over in some years; historically tend to outpace large cap stocks in February. The Russell 2000 index of small cap stocks turns in an average gain of 1.1% in February since 1979, the sixth best month for that benchmark. Russell 2000 has had a challenging January this year with only brief hints of the “January Effect.” Without this typically bullish momentum, Russell 2000 could also continue to struggle this February.
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    February’s post-election-year performance has been wretched since 1950, ranking dead last for S&P 500, NASDAQ and Russell 2000. Average losses have been sizable: –1.3%, –3.0% and –0.9% respectively. February ranks tenth for DJIA in post-election years with an average loss of 0.8%. February 2001 and 2009 were exceptionally brutal. NASDAQ dropped 22.4% in February 2001, its third worst monthly loss ever. One minor reprieve from the longer-term gloom is all five indexes have advanced in the last three post-election year Februarys (2013, 2017, and 2021).
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    Not a subscriber? Sign up today to continue reading our latest market analysis and trading recommendations and get a full run down of seasonal tendencies that occur throughout each month of the year in an easy-to-read calendar graphic with important economic release dates highlighted, Daily Market Probability Index bullish and bearish days, market trends around options expiration and holidays. In addition, the Monthly Vital Statistics Table combines stats for the Dow, S&P 500, NASDAQ, Russell 1000 and Russell 2000 and puts them all in a single location available at the click of a mouse.
     
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    Old School Cool Again?
    Thu, Jan 30, 2025

    As we said in today's Morning Lineup, IBM (IBM) is giving the market a blast from the past today as shares surged in reaction to earnings. As of this writing, IBM is trading at an all-time high thanks to an impressive 12.76% gain versus yesterday's close. That is not only the single best performance of any S&P 500 component today, but the 12%+ gain is on pace to be the third largest daily gain in IBM's long history dating back almost 60 years! The only two other days in the stock's history that have seen it rise by more were back in July 1996 and April 1999; both of which were also positive reactions to earnings.

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    IBM has fallen out of its Tech leadership role over the years. 25 years ago it ranked as the seventh largest stock in the S&P 500, but today it is only the 40th largest. However, IBM isn't the only leader of the past having come back with a vengeance. In the tables below, we show the seven stocks that were the largest in the S&P 500 25 years ago along with the largest currently (i.e. the Magnificent Seven). Those former megacaps accounted for a significant 20.25% of the S&P 500's market cap back then, but today's cohort is even more dominant accounting for over 32%.

    As for year-to-date performance in 2025, we would note that the past leaders have been outperforming the current leaders. The seven largest stocks from 2000 have risen an average of 6.6% in 2025. That includes the 17%+ gain in IBM, a 20%+ gain in General Electric (GE), and a high single-digit percentage gain in Walmart (WMT). Regaridng General Electric, the company today is a much different entity than the conglomerate from 25 years ago. With that said, even looking at GE's spin-off companies (not shown below) like GE Health Care (GEHC) and GE Veranova (GEV) returns have been respectable, each gaining well over 14% year to date.

    Again, the current leaders of the S&P 500 account for a much larger share of market cap and hence have a much greater impact on the index's performance. But that is the weaker group of stocks so far this year. On average, those seven names are up only 0.74% YTD (median: 1.93% decline). Four of the seven are down on the year including an almost 12% drop in NVIDIA (NVDA).

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    The Former Speaker Buys AI
    Fri, Jan 31, 2025

    Artificial intelligence continues to permeate throughout the economy, and one such example coming out of the Health Care sector is Tempus AI (TEM). Founded in 2015 and IPO'ing last June, TEM uses AI to analyze medical data in order to help provide diagnoses and treatment options for patients. As shown below, the stock saw a solid rally in the first couple of months after its IPO but quickly gave up those gains throughout the late summer and fall before a failed retest of those highs in November. By December, the stock had fallen through its 50-DMA and continued to erase any post-IPO gains. That is until the past couple of weeks. On January 14, the stock found a bottom which also happened to be the same day that House Rep and former Speaker of the House Nancy Pelosi purchased 50 call options in the stock that was later revealed in a disclosure on January 17. In reaction to the disclosure, the stock saw a one-day jump of 21.5%. There has been further follow through in the days since with the stock now back above its 50-DMA and at its highest level since early December. Since Pelosi's purchase, TEM has rallied more than 80% from the low $30s to the high $50s!

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    Pelosi (more specifically, Pelosi's husband Paul) has garnered a reputation as a successful trader in recent years as the trading activity of politicians has become increasingly scrutinized. Up to this point, most of Pelosi's trades have been in larger-cap names that didn't necessarily move when the disclosure came out. TEM is one of the first stocks we can recall that likely rallied significantly because of a Pelosi trade disclosure.

    Unusual Whales has created two counterpart ETFs that are meant to track Republican Trading (KRUZ) and Democratic Trading (NANC) based on trading activity disclosures from members of Congress and their spouses. As shown below, the Democratic Trading ETF has outperformed SPY since the ETF's inception in early 2023 with NANC up 58.9% compared to a 46.6% gain in the S&P 500 (SPY). The Republican Trading ETF (KRUZ) has gained roughly 30%, which means it's up about half as much as the Democratic ETF. Based on these two ETFs at least, investors have recently been better off following the trading patterns of Democrats rather than Republicans in Congress.

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    Bullish 2025 Forecast on Track
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    2025 is tracking the bullish post-election trend so far this year. We are encouraged S&P 500 is up 3.2% despite the DeepSeek deep fake. Our January Barometer will be positive unless the S&P 500 drops 189.55 points today. As January Goes, So Goes The Year.

    Gains this year will be tougher to come by and shallower than the past two years. Our 2025 annual forecast for 8-12% gain with a lot of chop and weakness in Q1 and Q3 is on target. Post-Election years have been much better in recent years but Q1 is a weak spot.

    Expect more volatility and chop in the near term. February has been notoriously weak and even more so in post-election years. February is the worst month for S&P 500, NASDAQ and Russell 2000 in post-election years since 1950.
     
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    As Goes January, So Goes the Year? The Bulls Hope So.
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    “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Mark Twain

    An effect widely known as the January Barometer looks at how the S&P 500 does in January and what it may mean for the next 11 months. It is known by the saying, ‘So goes January, goes the year’ in the media. The late Yale Hirsch first presented the phenomenon in Almanac Trader 1972. Today the Almanac is carried on by Yale’s son Jeff. I’ve known Jeff for years, and I must say, he is great, and I believe the work they do is some of the best in the industry on market seasonality, calendar effects, and many other indicators.

    Let’s look at the January Barometer. For starters, two years ago we saw the S&P 500 lower in January and it was followed by a vicious bear market. Then the past two years stocks were higher in January and we saw back-to-back 20% years.

    Historically speaking, when the first month was positive for stocks, the rest of the year was up 12.3% on average and higher 86.7% of the time. And when that first month was lower? It was up about 2.1% on average and higher only 60% of the time. Compare this with your average year’s final 11 months, up an average of 8.1% and higher 76.0% of the time, so clearly the solid start to ’25 could be a positive for the bulls. Lest you fear January has been too strong, a good start to January tends to see strong gains the rest of the year as well, as we discuss below.

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    Here’s another way of showing what tends to happen based on whether January was higher or lower. We know markets trend, but my oh my, what that first month does can really pick the direction for the full year.

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    With one day to go in January, the S&P 500 is up more than 3%, which has been a very good sign. Below we show all the times the first month of a new year gained at least 3% and you can see that continued outperformance is perfectly normal. The full year had and average gain of 21.3% and was higher nearly 93% of the time, which should have bulls smiling.

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    This year saw stocks lower during the historically bullish Santa Claus rally period, but then rallied the first five days of the year and now all of January. I looked more closely at a strong first five days in Some Good News For The Bulls, but what does it mean when we don’t have a Santa Claus Rally, but both the first five days and January are higher? Interestingly, this combo has happened only three other times in history, so we are dealing with a very small sample size. The good news is stocks were higher two out of three times with more than a 20% median return.

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    We’ve been bullish and expected the late December weakness to be fairly contained, and that has fortunately played out. The data in this blog does little to change our overall optimistic tone in 2025, but be aware that February can be a banana peel month (which I’ll discuss soon enough). For now, enjoy the January returns and have a great weekend!
     
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    The Tariff Man Cometh, but What’s the Playbook?
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    On February 1st, President Trump signed executive orders (EO) imposing tariffs on Canada, Mexico, and China, effective 12:01am February 4th. The orders included:
    • 25% tariffs on Canada, apart from energy imports (tariffed at 10%)
    • 25% tariffs on Mexico
    • 10% tariffs on China
    These tariffs applied to all goods and would be over and above existing tariffs, including “de-minimus” goods. That means even a small gift bag sent from Toronto to Chicago would be subject to tariffs, not to mention small packages from China. (That’s one way a lot of Chinese exporters got around existing tariffs.) The White House placed some conditionality on these tariffs, including improvement in the immigration situation and improvement in the drug (fentanyl) situation.

    These tariffs are a big deal, since it’s universally applicable across goods coming from America’s three largest trading partners, which is why markets reacted quite negatively as soon as trading started last Sunday night. However, the good news is that there was a big reprieve on Monday, as the White House hit the pause button on both the Mexico and Canada tariffs. Equity markets recovered from losses, though they closed the day lower (the S&P 500 fell about 0.8% on Monday, February 3rd). The Canadian dollar and Mexican Peso fell over 2% after the tariffs were announced, but more than recovered after the tariff pause announcements on Monday, eventually ending up with slight gains against the US dollar.

    Canada and Mexico Tariffs Paused, but There’s Still Cloud Cover
    The 25% tariffs on Canada and Mexico were paused by President Trump for 30 days. This was after conversations he had with the heads of Mexico and Canada on Monday.

    President Claudia Sheinbaum of Mexico said they reached a series of agreements to pause the tariffs, including, reinforcing the border with 10,000 Mexican National Guardsmen to counter drug trafficking. The US is expected to prevent trafficking of high-powered weapons into Mexico.

    The pause on Canadian tariffs came later in the day, after two phone calls between Trump and Canadian Prime Minister Justin Trudeau. Canada will spend about $680 million on border security, pushing ahead with plans that have been in the works. In addition, they will also appoint a “fentanyl czar,” list cartels as terrorists, ensure 24/7 eyes on the border, and launch a Canada-US joint strike force to combat organized crime, fentanyl, and money laundering.

    But this isn’t over.

    For one thing, teams from Canada and Mexico need to work with US negotiators to secure a security and trade deal over the next month. Therein lies the rub, as Trump will clearly expect trade concessions from both parties. Security arrangements will likely also need to be quantified and ensure mechanisms for verification. Trade is relatively “easier” to measure, but even here, it’s not simple. China reneged on the “Phase 1 Trade Deal” they signed during Trump’s first term in office, falling well short of their commitments to buy US goods.

    Second, the 10% tariffs on Chinese goods went into effect at midnight on Tuesday. These are not as big as those proposed on Canadian and Mexican goods, but it could still be significant for some sectors (including smartphones and computers). China retaliated with tariffs on US coal, gas, and other goods — but these are not that significant, and perhaps indicates China’s willingness to negotiate. As with Mexico and Canada, there may be a temporary reprieve if Trump and President Xi of China have a fruitful talk.

    Third, Trump’s next target is likely Europe. Expect more announcements on this front in the upcoming weeks. Unlike Mexico and Canada, both China and Europe may be less incentivized to reach a quick deal (they may not have much to offer anyway).

    These Tariffs Are a Big Deal
    These tariffs, assuming they are imposed, are significant. Even if it doesn’t happen, the cloud of uncertainty is something businesses will have to deal with. If it does happen, that would be quite a massive shock — much larger than all the trade actions taken in Trump’s first term. Canada, China, and Mexico make up about 43% of US goods imports, and about 41% of US export destinations, as this chart from the Council of Foreign Relations (CFR) illustrates.

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    An immediate problem is oil and gas, which is especially salient for inflation and the Federal Reserve (Fed). The US is the largest producer of oil in the world. However, it mostly produces “light, sweet” crude oil. But US refineries, which refine oil into gasoline/diesel/etc., require “heavy” crude, which it imports from other countries. Especially Canada. The US’s biggest import from Canada is crude oil and other petroleum products, making up over a third of Canadian imports.

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    There’s a reason why the Trump administration chose to impose only 10% tariffs on Canadian energy. Prices are still likely to go up. 10% tariffs translate to ~ $6/barrel on Canadian crude, equivalent to about 14 cents/gallon. However, the impact is going to be quite localized, with the Midwest more likely to be impacted. Areas in New England may also see higher electricity prices (for example, Maine imports 100% of its heating oil from Canada).

    This will also be a huge blow to the North American auto industry. Vehicles and parts make up the largest portion of imports from Mexico, at about a fifth of all US imports. In reality, there really is no US-Canada-Mexico trade. Instead, it’s all one big zone, i.e. North America. This is especially true for the auto industry. Cars/trucks and various parts move across supply chains situated across all three countries, and sometimes cross borders multiple times.

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    In fact, a lot of the content in Mexican motor vehicle exports to the US originates in the US. Ultimately, a 25% tariff on Mexico and Canada will raise production costs for automakers, potentially adding up to $3,000 to the price of 16 million vehicles sold in the US. Most automakers are significantly exposed to Canada and Mexico tariffs hitting their plants. About half of the cars and light trucks exported by Mexico to the US in 2024 were made by the Big 3 in Detroit.

    Mexico is also America’s largest source of imported fresh fruits and vegetables. The 25% tariffs will hit all this produce at the worst possible time, since winter is when the US relies most on imports.

    All this also tells us that Mexico and Canada are especially reliant on trade with the US, rather than the other way around. Trade makes up ~ 70% of both economies’ GDP. About 80% of Mexico’s exports come to the US, while about 70% of Canadian exports come to the US. Whereas exports are not a significant piece of the US economy. This asymmetric dependency is perhaps what Trump is hoping to leverage — to get them both at the table, and extract concessions.

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    China Could Be Tricky
    China is less dependent on the US. Trade (imports + exports) makes up less than 40% of the Chinese economy, much lower than about 60% just two decades ago. Trade with the US has also pulled back significantly, especially areas which were hit by tariffs in 2018-2019, though China got around these by increasing trade with countries like Vietnam, and even Mexico. In fact, China’s share of global trade has actually increased by about 4% since 2016. All this means the US has much less leverage over China, relative to Canada and Mexico. But this is why there is a possibility of seeing universal tariffs. That way China can’t get around US tariffs. And why these first set of tariffs may not be the last ones we see.

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    In 2018, the Chinese retaliated in several ways, zeroing out soybean imports from the US for a year (hitting states like Iowa), adding tariffs on all other US agriculture imports, and halting purchases from Boeing. Another thing to keep an eye on will be their currency. Unlike the CAD and the Peso, Chinese authorities control the Renminbi. After the trade war started in February 2018, the Chinese renminbi fell about 14%. China’s currency is currently trading even below 2019 lows, and it’ll be interesting to see where Chinese authorities fix their new level over the next several days.

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    With respect to any “deal,” that would have to come after extensive negotiation. This is what happened in 2018. Moreover, China did not meet the terms of the deal. Far from it, in fact. As part of the “Phase 1 Deal” signed on January 15th, 2020, China was supposed to buy an additional $200 billion of US goods. As the Peterson Institute has detailed, China fell well short of this, buying only 58% of the US exports it committed to purchase over 2020-’21.

    China purchasing manufactured goods were a key piece of that deal, making up 70% of the value of all goods covered by purchase commitments. Again, they were even further below commitments in this area. US manufacturing exports to China nearly doubled between 2009 and 2017. Then it flattened in the second half of 2018 and fell by 11% in 2019 (partly due to retaliation against Trump’s first round of tariffs). But even after the Phase 1 deal, US manufacturing exports fell another 5% (2020), falling 43% short of the legal commitment for 2020, and 12% below pre-trade war levels.

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    The US is going to need stricter enforcement mechanisms this time around, which is going to make things even harder. Or we get a rerun of what happened after the last trade deal with China. All of this will take time to play out.

    Will These Tariffs Hit Inflation?
    It’s hard to answer this question in a definitive way, because there are so many things intertwined with tariffs, including retaliatory measures, currency changes, demand shifts, and supply dynamics.

    All else equal, tariffs are a tax, and that means prices will go up. Note that tariffs will send the price level higher. But technically, a one-time increase in the price level is not inflation. Prices would have to keep going up for higher inflation, which would only happen if tariffs kept ratcheting higher. But as the 2024 election showed, consumers care a lot about price levels even if inflation is low.

    Goldman estimates that higher tariffs on Canada and Mexico raises the effective tariff rate by 7%-points, implying a 70 bps increase in the core Personal Consumption Expenditures Index (core “PCE,” the Fed’s preferred metric of inflation), and a 0.4% hit to GDP. Existing China tariffs already contribute 0.3% to core inflation (core PCE is currently up 2.8% year over year).

    However, we don’t know any details yet, and all else is never equal. Let’s look back at 2018 once again.

    Core PCE inflation ran around 1.8% annualized in 2018-’19, below the Fed’s target of 2%. So it’s natural to think that the 2018-’19 trade war didn’t have any impact on price. However, this is not the case. Prices in tariffed categories rose by almost exactly the amount of imposed tariffs , just as you would expect. However, we were already in a downtrend for core goods inflation prior to the tariffs being imposed, which continued for non-tariffed goods and offset the overall inflationary impact.

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    Another dynamic in play in 2018-’19 was that companies did not pass higher input costs onto customers (a lot of those tariffs were on “intermediate” goods). But we may be in a different dynamic now, where companies feel like they can pass higher costs to consumers. That’s what they did in 2021-’22, even as they maintained their own margins (and even expanded them). In fact, Raphael Bostic, the Head of the Atlanta Federal Reserve, recently said that leaders at companies he speaks to said they would pass higher costs through “100 percent.”

    Tariffs Are Likely to Hurt US Manufacturers
    Ultimately, the 2018-2019 trade war hurt US manufacturers. The trade war meant US manufacturers already started down a hole, thanks to retaliatory tariffs and a strengthening dollar. US goods exports were flat across 2018-2019. On top of that, China also failed to live up to its commitments to buy US manufactured goods, as I discussed above.

    It’s likely the same happens again. The dollar has already been strengthening, rising almost 9% since the end of September — a big move over a fairly short period of time (4 months). As we wrote in our 2025 Outlook, the strong dollar does two things:

    • It mitigates some of the inflationary impact of tariffs
    • It makes US exports more expensive
    Over the last two years, exports have been flat amid an elevated dollar. Q4 2024 was especially bad — real goods exports fell 5% (annualized), pulling real GDP growth down by 0.4%.

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    Market Impact – The Fed Doesn’t Like Uncertainty Either, and That’s a Problem
    As I pointed out earlier, it’s going to take a while to understand any inflationary impact of the tariffs, assuming they even happen. Given the methodology of inflation metrics, it’s going to be months before we have any understanding of the impact.

    However, that creates a problem, as it could push the Fed to sit on an extended pause. Thus, keeping rates elevated longer may be needed, raising the odds that something breaks.

    I just wrote a couple of weeks ago after positive CPI data that the inflation outlook still looks good. Powell himself said the same thing after their meeting last week. He was surprisingly positive about the inflation outlook. At the same time, the Fed is increasingly concerned about inflation uncertainty. That is why they got hawkish in December. In the first post-election Fed meeting, they cut rates by an additional 0.25%, but their dot plot projections showed just 2 cuts in 2025 (versus the prior projection of 4 cuts). Also included in the dot plot, 14 of 19 members thought inflation uncertainty is higher. And 15 thought inflation risks are “weighted to the upside”. These are big shifts from their September projections, as you can see below.

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    Back in December, Powell was reluctant to admit this shift was because of tariffs and deficit spending by the incoming administration. However, he readily admitted it last week after their January meeting (and it did come out more in the minutes). Powell pointed out that there is elevated uncertainty due to significant policy shifts, from tariffs, immigration restrictions, fiscal policy (deficits), regulatory policy.

    Trump’s actions this weekend suggest they were right to worry. Fed members’ statements after the tariff announcements echoed their worries.

    Bostic: “I had uncertainty on December 31. The amount of uncertainty that we have today is greater than that.”

    Chicago Fed President, Austan Goolsbee: “Now we’ve got to be a little more careful and more prudent of how fast rates could come down because there are risks that inflation is about to start kicking back up again.”

    Boston Fed President, Susan Collins: “The kind of broad-based tariffs that were announced over the weekend, one would expect to have an impact on prices,”

    Yes, the tariffs were pulled back, but for now, it’s temporary. Ongoing uncertainty for Fed members may start to increase the probability of no cuts at all in 2025, a potential headwind for risk assets. Just look at the last three months: equity markets have moved in tandem with the probability of no rate cuts in 2025 (as priced by fed funds futures).

    • From November 5th through December 6th, the probability of no cuts in 2025 fell from 10% to 4%, i.e. markets were pretty sure of cuts in 2025. The S&P 500 gained over 5%.
    • From December 6th through January 10th, the probability of no cuts in 2025 surged to over 30%. The S&P 500 pulled back by 4%.
    • From January 10th through January 27th, the probability of no cuts in 2025 fell back below 10%. The S&P 500 gained over 5%.
    • Since then (through February 3rd), the probability of no cuts in 2025 has risen to almost 15%, and the S&P 500 has pulled back about 2%.
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    For now, markets appear to be betting that the inflation outlook looks good, and that we’re still on track for 1-2 cuts in 2025. But this is really the big risk, and likely how tariffs, and uncertainty around them, may impact the stock market over the next several months.

    Will Deficit Spending Create A “Get Out of Jail Free” Card?
    It helps to go back to 2018-2019 to understand this. Deficit spending surged after the Financial Crisis. The primary deficit rose to about 6.5% of GDP (the primary deficit is spending excluding interest payments on debt). However, the deficit started to shrink after 2010, falling to about 0.5% of GDP in 2015. This is historically what happened as economic expansions wore on. Post-recession deficits shrink, and primary balances eventually head into a surplus. But the late 2010s were an exception. A big increase in federal spending, and lower revenue on the back of the 2017 tax cuts, sent the deficit higher. The primary deficit grew to about 2.1% of GDP by the end of 2019. Just from 2018 through 2019, the primary deficit grew by 70 bps, from 1.4% to 2.1% of GDP. As you can see from the chart below, these deficits were completely outside the historical norm. In both the 1990s and 2000s, the primary balance eventually became a surplus.

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    Deficits provided a big boost to the economy in 2018-‘19, despite the trade war. Real GDP grew 2.7% annualized over the two years, above the 2.4% trend growth. A big part of this was fiscal spending, with government spending rising 3.3% annualized over that period (reversing close to half a decade of austerity). Tax cuts also pushed investment spending up in 2018, though it eased in 2019 amid the trade war (especially structures and equipment investments).

    Can government spending more than offset any headwind from tariffs this time as well?

    The short answer is yes, but I predict a couple of hurdles. One is that fiscal spending has to be authorized by Congress, and Republicans don’t have a lot of room to maneuver in Congress given their narrow majority in the House. Republicans in Congress are working on a large tax policy package. This will be needed simply to avoid tax increases on January 1st, 2026, when several provisions of the 2017 tax cuts sunset. But they’re also planning additional tax cuts, including a further reduction of the corporate tax rate from 21% to 15%, amongst other measures.

    In my opinion, the tax package is likely to pass, but we may have to wait a while for clarity on provisions, let alone the amount by which it’ll increase the deficit. And then of course, final passage.

    The second hurdle is that the deficit is already really large. The primary deficit is close to 3% of GDP. Once you include interest payments on debt, it’s about 6% of GDP (thanks to high interest rates). That’s going to be an issue for two sets of people: 1) members of Congress who still care about the deficit (a rarity, but still), and 2) the Fed, who’ll be worried about its inflationary impact. A big deficit-busting package may result in the Fed sitting on its hands throughout 2025, with no cuts at all. But those deficits may overcome any headwinds from higher interest rates, at least in the near-term.

    TLDR or “Too Long, Did Not Read” Version for Those Who Just Want the Takeaway
    The proposed tariffs on Canada, Mexico, and China are larger than anything Trump did in his first term. Yes, the tariffs on Canada and Mexico have been paused, but there’s a still a lot of uncertainty. (Will they reach a deal? What are the terms of the deal? Are those terms enforceable? Who verifies?). If anything, there’s an enormous tariff cloud cover that wasn’t there last week, including the prospect of 25% tariffs on Canada and Mexico in a month, 10% across the board tariffs on Chinese imports starting Tuesday, and higher probability of big tariffs on incoming European goods.

    The economic and inflationary impact of the tariffs are very unclear, simply because we have no idea of the size of the tariffs that may happen, how other countries will respond or retaliate, and how currencies will move in response. We’re totally in the dark from that perspective, but in some ways, that’s secondary to markets. With respect to the impact on markets, there’re two key aspects.

    One is the Fed. The uncertainty is likely to push them into an extended pause. They’re going to want to have a better sense of the impact of tariffs before proceeding with more cuts. If there’s a prolonged delay as the tariff can is kicked down the road, and deals are being worked out, we could even see rate cuts pushed out to 2026, assuming the labor market doesn’t falter or we don’t get some other negative growth shock (something we shouldn’t root for because bad is bad news). That’s not going to be good news for stocks.

    The other key is Congress. The economy is likely to see headwinds on housing from higher rates, as well as headwinds to business investment due to tariffs (as in late 2019). But deficit-financed government spending could more than offset these. As we wrote in our 2025 Outlook, opportunities like tax cuts can potentially outweigh threats from tariffs and higher rates. However, the sequencing matters, and now we have the threats coming ahead of opportunities. That’s a recipe for volatility, and something that can sap animal spirits. But we’re barely in the first innings, and there’s a long way to go.
     
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    Welcome to the Worst Month of the Year in a Post-Election Year (and Why American Doesn’t Want the Eagles to Win)
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    “The only place success comes before work is in the dictionary.” Vince Lombardi

    First things first, February maybe just started, but it has already seen a great deal of volatility around tariffs. The big question I have is, Should we be surprised? It turns out that February in a post-election year is actually the worst month of the year on average, so maybe we are simply due for some volatility? Perhaps.

    Hear me out. Maybe it is quite common for the honeymoon period after the election from November – January to be just peaches, but then February comes and reality hits. Or maybe around February is when a President comes out with some of the more controversial policies? Just get them out of the way early and move forward? Whatever the exact reason, the S&P 500 has been down 1.3% on average in post-election years and whether it is higher has been a coinflip, so some volatility or weakness now shouldn’t be a surprise.

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    Taking this a step further, since 1950, over the past decade, and over the past two decades, the month of February has once again one of the worst months of the year for stocks.

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    Breaking things down by the full four-year presidential cycle shows the first quarter of a post-election year is one of the worst in the entire four year cycle. Yes, January got off to a nice start, but the calendar isn’t doing anyone any favors right now.

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    Lastly, the second half of February is historically the banana peel part of the month.

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    The Super Bowl Indicator
    Now with the serious part out of the way, let’s get to the fun part of this blog.

    First things first, don’t ever invest based on who wins the Super Bowl. Or what color Taylor Swift will wear at the big game, or the coin toss, or how bad the refs will be (who are we kidding, we know they want the Chiefs to win). With that out of the way, it is Super Bowl season, and that means it is time to talk about the always popular Super Bowl Indicator!

    The Super Bowl Indicator suggests stocks rise for the full year when the Super Bowl winner has come from the original National Football League (now the NFC), but when an original American Football League (now the AFC) team has won, stocks fall. Of course, this is totally random, but it turns out that when looking at the previous 58 Super Bowls, stocks do better when an NFC team wins the big game.

    This fun indicator was originally discovered in 1978 by Leonard Kopett, a sportswriter for the New York Times. Up until that point, the indicator had never been wrong.

    We like to make it a little simpler and break it down by how stocks do when the NFC wins versus the AFC, ignoring the history of the franchises. As our first table shows, the S&P 500 gained 10% on average during the full year when an NFC team has won versus 8.1% when an AFC team has won. Interestingly, the AFC and NFC have each won 29 Super Bowls.

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    So, it is clear-cut that investors want the Eagles to ground the Chiefs and win, right? Maybe not, as stocks have gained over the full year 12 of the past 13 times when a team from the AFC won the championship, going back 21 years. In fact, the only time stocks were lower was in 2015, when the full year ended down -0.7%, so virtually flat.

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    By my math, there have been 58 Super Bowls and 22 different winners. I broke things up by franchise and city. For instance, Baltimore has won three championships, but one for the Colts and two for the Ravens. So I differentiated the two. Then the Colts won one in Indy, so I broke that out as well. Either way, I still don’t see my Bengals on here, but I expect that to change next year! Remember, Joe Burrow is the only man who can beat Patrick Mahomes and Josh Allen with a 5-3 record against them combined and a winning record against both, but I digress.

    Getting to the two teams in it this year, the Chiefs have won it all four times and stocks gained 15.9%, while the Eagles have won it all only once and stocks fell about six percent back in 2018.

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    It might not matter who wins, but by how much they win. That’s right, the larger the size of the win, the better stocks do. (Let’s have another disclosure that nearly everything I’m saying here isn’t in any way, shape, or form related to what stocks actually do.)

    That’s right, when it is a single digit win in the Super Bowl, the S&P 500 is up less than 7% on average and higher about 62.5% of the time. A double-digit win? Things jump to about 11% and 79%. And wouldn’t you know it, when the final score is three touchdowns or more, the S&P 500 gained 13.6% for the year and is higher about 85% of the time.

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    Here’s a list of all the big blowouts and what happened to stocks those years. Not too bad, huh?

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    Who should you root for? Personally, I can’t stand either team, but I guess I’ll just say when Philly wins a Super Bowl or World Series really bad things tend to happen. I’m honestly still not sure I can root for Mahomes and his ref buddies handing him another trophy even knowing this, but it is worth at least knowing.

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    Here are 12 other takeaways I noticed while slicing and dicing the data:
    • The NFC and AFC have won 29 Super Bowls each.
    • The past three Super Bowls have been decided by 3 points each, the closest three Super Bowls have ever been in a row (and small enough for a well-timed flag to make the difference).
    • The Steelers and Pats have won the most at six, but the 49ers sit at five and the Chiefs could match them with a win.
    • As great as Peyton Manning was, he only won two Super Bowls. His brother also won two. Odds are their kids will win a few more. Or maybe a nephew. (We’re looking at you Arch.) Omaha, Omaha!
    • The Lions, Browns, Jags, and Texans have still never made the Super Bowl. I tried to tell all my Lions friends it wasn’t happening!
    • The NFC won 13 in a row from 1985 (Bears) until 1997 (Packers).
    • The Bills made the Super Bowl four consecutive years, losing each time.
    • The highest scoring game was 75 total points in 1995 between the 49ers and Chargers.
    • The lowest scoring game was only 16 points in 2019 when the Pats beat the Rams.
    • The closest ever was a one-point win for the Giants over the Bills in 1993 (the Scott Norwood game).
    • Three years ago my Bengals were hosed with a horrific holding call in the endzone at the end of the game to literally hand the Rams the game. The script is real my friends.
    • In 1990 the 49ers beat the Broncos by 45 for the largest win ever.
    So, there you have it, your complete breakdown for the big game. I’m saying the Eagles, as I can’t believe the NFL would rig another game for the Chiefs with the whole country watching! Have fun and here’s to moving President’s Day to the day after the Super Bowl, one thing we all can agree on!
     
  20. StockBoards Bot

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    Will a Cutback in Government Jobs Crash the Labor Market? We Don’t Think so, and Here’s Why
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    There’s been a lot of chatter about cutbacks in federal government employment, including “buyout offers” (apparently even at the CIA). The deadline for accepting the buyout is February 6th, and reports suggest anywhere from 20,000-40,000 workers have accepted the offer.

    Irrespective of how you think about it (good, bad, ugly, or apocalyptic), there’s been some fear that this could be a big blow to the labor market. At the same time, there’s also been some wild suggestions about how many employees can be cut from the federal workforce. I thought it’d be useful to try to put some context around this and ground it with actual data.

    Federal government payrolls are close to historical lows (as a percent of the workforce)

    Overall non-farm employment is just under 160 million, as of December 2024, and it’s risen almost 5% over the last five years. Meanwhile, federal government payrolls are about 3.0 million and rose just under 6% over the same period. Of the 3.0 million people on federal government payroll, about 600,000 are US Postal Service workers. In contrast, state and local government payrolls are just over 20 million.

    The relative percent increase in federal government jobs over the last year was slightly higher than total payrolls, but federal government payrolls (excluding USPS workers) are still just 1.5% of total employment. Federal payrolls have risen over time, but you’d expect that with population growth (and overall payroll growth). But the current proportion of federal government workers is historically low. In fact, it’s been steadily falling over the last several decades:
    • 1940s: 4.3%
    • 1950s: 3.6%
    • 1960s: 3.2%
    • 1970s: 2.8%
    • 1980s: 2.3%
    • 1990s: 1.8%
    • 2000s: 1.5%
    • 2010s: 1.6%
    • 2020s: 1.5 %
    Of course, the federal government does a lot more now than it did several decades ago, and if anything, you’d think it’s actually gotten more efficient, i.e. has been delivering more services with fewer workers as a percent of total employment. I’m not denying at all that there are inefficiencies in the federal workforce. Only that, like the private sector, efficiency has steadily improved overall.

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    It may also help to understand how jobs are distributed across the federal government. Just under half a million federal employees work in Veterans Affairs (VA), while another 600,000 work at the Department of Homeland Security, Department of the Army, and Department of the Navy. Add in the 225,000 at the Department of the Air Force and the Department of Defense, and that’s over half of Federal employment. There’s just not a lot left to cut after that.

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    Even if 50,000 Federal workers take the “buyout offer,” that’s just about 2% of Federal payrolls. I don’t know if that is what they expected, but it seems low. Here’s some perspective. Over each of the last three months (October – December 2024):
    • 30,000 people were hired in the Federal government each month
    • Of course, people also left (including quits and layoffs), to the tune of an average 28,000 each month
    Technically, it also looks like workers who take the buyout offer will be “employed” through September. But Presidential advisor and government “efficiency czar” Elon Musk has said they don’t have to show up for work and can “just watch movies and chill, while receiving full government pay and benefits” . (By the way, this is not at all a recommendation to accept the buyout — we have no idea whether and how any of this will actually play out.)

    Irrespective of what happens, or does not happen, the turnover in federal government payrolls is going to be tiny compared to what’s happening in the overall labor market. Again, here’s some more perspective on the dynamics of the overall US labor market:
    • An average of 5.41 million people were hired across the US economy in each month of the last quarter (Q4)
    • An average of 3.20 million workers quit their jobs in each month of Q4
    • An average of 1.77 million people were laid off in each month of Q4
    These are staggeringly large numbers compared to what we’re talking about when discussing federal government employment. Even if the Trump administration lays off everyone outside VA and defense-related areas, which would be about 1.2 million workers, that’s a fraction of the normal turnover we typically see every year (let alone every month) in the US labor market, let alone as a proportion of the overall labor force. There may be other issues, especially related to social security administration, Medicare, trade, and even economic data collection (to name just a few), but that’s a topic for another day.
     

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