Market Musings 2/18/2025
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
#RateCuts, #Tariffs and #AI – what’s next?
Markets opened the shorten week fairly cautious at all-time highs despite lots of uncertainty. As we mentioned previously, not a lot expected this week compare the last few. So, it feels like a good time to take inventory of some of our bigger 2025 market themes.
So, first #RateCuts…
By now, it’s old news that they’re now on pause. The Fed sees stabilized #LaborMarkets and healthy economy, but is starting to grow a bit nervous with the sticky #Inflation. As we saw last week, inflation appears to be inching back up in recent month.
At this point, we see resumption of #RateCuts unlikely until the Fall at the earliest. This mostly aligns with market expectations, but maybe a bit more pessimistic. Current rate cut expectations has a two thirds chance by the July meeting and almost one hundred percent by September.
The two main factors we’re watching here is #Inflation progress over the next few months and the mindset of Fed officials－basically what and how much do they need to see to regain confidence in the progress.
Next, #Tariffs…
The initial round of #Tariffs drama appears to be over for now. If you’re keeping score, we got a bit of tariff tiff with China and some broad steel and aluminum measures enacted but mostly delayed with Canada and Mexico until next month and the rest expected in April.
The immediate impact was mostly delayed, but we might see some near-term #Inflation from it. For example, some PC makers already announced 10% price increases to account for the China tariffs.
However, a larger trade war appears, for now, not in the imminent future. We’ll have to see as the Canada and Mexico deadline approaches next month as well as what deals get made with the rest of our global trade partners ahead of the reciprocal tariffs promised in April.
Also, we’ll have to see how this impacts US trade longer-term. Even just the threat of #Tariffs creates uncertainty and we could see trade partners look to reduce exposure to US to minimize risk and volatility in the future.
And then, #AI…
DeepSeek shocked the #AI server buildout ecosystem with a more cost-efficient model. However, our #AI names have mostly recovered from the sell-off since the end of January. This has been bolstered by #BigTech hyperscalers recommitting to #AI server buildout plans and even increasing expected spend like Google.
#AI continues to be a flashy buzzword for companies, but applications are still early and haven’t yet proved any real return on investment despite the massive server spending. While we don’t see as much impact to this year’s data center spending plans yet, we do expect developers to have started focusing on more cost-efficient models by now which could impact more mid-to-long term #AI spending plans.
#RateCuts, #Tariffs and #AI are themes we’ll continue to monitor throughout the year. However, more near-term, we’ll see if the Fed minutes shakes any confidence this week or what Nvidia has to say at its earnings next week.
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As of the publish date, Ursa portfolios may own GOOG or NVDA. The stocks mentioned in this article may cease to be owned by Ursa portfolios at any point.
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Original Photo by Pixabay.