Market Musings 2/2/2025
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
The S&P 500 kicked off the year strong finishing January up almost 3%, but tariffs may derail the rally in February.
So far this year, we’ve seen overall markets broadly rally on optimism for a stronger business environment. However, the one outliner has been #AI after the DeepSeek news last week.
❄️ January Rally
#AI has been driven by massive data center spending by hyperscalers while investors have grown skeptical. Then, the DeepSeek news dropped. While the jury is still out on its legitimacy, it has already absolutely shifted the discussion around spending. It put a spotlight on whether #AI models should place more focus efficient use of computing power to drive adoption (rather than accept the power usage and just scale more).
This is likely good for hyperscalers, but may dampen the #AI server supply chain outlook. #AI is still likely to grow and needs more servers and data centers. However, the buildout may just not need to be as massive as it is currently.
Outside #AI, other sectors were generally stronger in January. With the change in the White House, markets were looking forward to more favorable business conditions going forward.
While there was a flurry of policy change news on Inauguration Day, #Tariffs were notably delayed to start in February. Markets rallied on that with optimism negotiations could happen before anything gets imposed.
🚢 February Tariffs
Over the weekend, the White House announced 25% #Tariffs on Canada and Mexico and 10% on China starting on Tuesday. There are also essentially no exemptions outside of some lowered energy tariffs.
Canada has already announced retaliatory tariffs and Mexico has promised retaliation as well. #Tariffs and what may be the start of a trade war will likely be the focus throughout the month and potentially beyond. We expect markets to open February down on Monday.
We would expect the #Tariffs disruption to, at least near-term, impact #Inflation as well as place more pressure on the economy’s chances for a #Goldilocks soft landing.
As usual, we recommend adding to portfolios on a regular basis and look to take advantage of any market pullbacks for additional contributions.
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The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.
Original Photo by fauxels.