DeepSeek: deep change or deep bluff?
- Chinese firm DeepSeek announced that its open-source AI model delivers results comparable to those of major competitors but at significantly lower costs
- Markets reacted with volatility, particularly affecting companies that derive substantial profits from the AI segment (e.g., Nvidia)
- The announcement introduced an intriguing perspective on the market, highlighting the possibility of AI becoming more accessible in the future, potentially unlocking new opportunities across various sectors
- Notably, Deep Seek’s founder, Liang Wenfeng, has an interesting background—he also founded the hedge fund High-Flyer in 2015.
Reporting season: Eyes on tech stocks
- DeepSeek’s AI shockwave will put tech earnings in the spotlight
- This week a number of tech companies will report their Q4 results, including Microsoft, Meta and Apple, as well as several semiconductor companies
- Tech leadership under scrutiny: The sector is slowly losing its dominance in the S&P 500, raising questions among investors
- Narrowing growth gap: The once wide gap between tech and the broader market could continue to narrow in 2025, favouring more rotation and change in sector leadership
Much Bigger
- Trump’s Treasury pick Scott Bessent is backing universal tariffs on US imports starting at 2.5%
- The President said he wanted far larger across-the-board tariffs than the 2.5% suggested, as well as additional tariffs on foreign pharmaceuticals, semiconductors, aluminum and steel
- The Bloomberg Dollar Spot Index climbed 0.5%, while major commodities including copper and aluminum fell
- Trump’s speech came after a weekend where he threatened tariffs of as much as 50% on Colombia unless they agreed to accept migrants being deported by the US
- The new president reiterated to House Republicans that any countries that refuse his deportees would be subject to the same tariff-and-sanction threat Colombia narrowly avoided
Fed & ECB: No Surprises Expected
- Busy week for central banks with both Federal Reserve and ECB gathering for first meeting of the year – little uncertainty concerning policy rate decisions
- FOMC expected to keep rates on hold with first cut of the year currently expected only in June
- The press conference will likely see an effort to retain optionality amid continued policy uncertainty
- Thursday afternoon a 25bp cut from the ECB is a near certainty – investors will look for clues concerning future moves during Lagarde’s press conference, especially concerning Trump’s possible tariffs and consequently inflation risks
- Markets expecting ECB to go back-to-back and cut rates also at next meeting in March (85.7% chance currently priced in)
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