Trump continues to rock.

January 25-31, 2025

Big news. IT giants involved in artificial intelligence are having problems amid competition from Chinese companies. In the US, hysteria has broken out around the Chinese project DeepSeek, which has triggered the largest sell-off in the history of the NASDAQ market.

Note that DeepSeek itself has nothing to do with it, since this product has been on the market for about two months. However, the noise in the media, primarily the Bloomberg agency, caused such a sharp reaction.

The total change in the capitalization of all public American companies was minus 953 billion per day, or 1.55%, taking into account the financial sector. 5 companies that made the largest negative contribution to the market change of all companies:

•  Nvidia: 593 billion

•  Broadcom: 199.5 billion

•  Alphabet: 99.1 billion

•  Oracle: 70.8 billion

•  Microsoft: 70.6 billion

Only four companies formed the decline of the entire market (Nvidia, Broadcom, Alphabet and Oracle), and the rest of the companies are at zero. There was no general collapse, the positive contribution of all companies that grew amounted to 707 billion, and the total negative contribution of falling stocks was 1660 billion.

The final conclusion will be in the final section of the Review.

Macroeconomics. Industrial sales in Italy -2.6% per year, 20th minus in a row:

The official PMI (an expert index of the state of the industry; its value below 50 means stagnation and decline) of China’s industry is 49.1, repeating a 9-year low (excluding the Covid-related declines):

The same picture is in the overall PMI for all industries:

The optimism of the previous weeks turned out to be exaggerated.

The US goods trade deficit hits a new record amid a surge in imports:

Please note that this data has actually confirmed our assumption from two weeks ago (https://fondmx.pro/en/weekly-wrap/the-same-once-again/), in which we said that domestic production in the US has exhausted its reserves.

The number of company bankruptcies in Germany is the highest in 10 years:

Tokyo Prefectural CPI (+3.4% y/y) again headed toward its 44-year peak in January 2023:

Expectations for growth in eurozone factory prices are the highest in almost 2 years:

French unemployment claims rise for 4th month in a row:

And the number of applicants is already at its highest in 3 years:

The number of unemployed in Germany has been growing monthly for 25 months in a row:

It’s very close to the Covid maximum; without it, it’s a peak in more than 10 years:

German retail sales down 1.6% m/m, worst in 26 months:

The US Federal Reserve left its monetary policy unchanged, criticised high inflation and made it clear that it intends to continue to cut rates very carefully:

Details in the next section of the Review.

The ECB cut the rate by 0.25% to 2.90%. This is already much less than in the US.

The Brazilian Central Bank raised the rate by 1.00% to 13.25%, almost returning it to the peaks of 2022/23. The Swedish Central Bank cut the rate by 0.25% to 2.25%, ready for another reduction before the middle of the year. The Canadian Central Bank also cut the rate by 0.25%, to 3.00%, and the South African Central Bank is following the same course (-0.25% to 7.50%).

Main conclusions. First, about the main event of the week. The collapse not of the market, but of the main producers of artificial intelligence (AI), which occurred not only on Monday, but also on Wednesday (against the backdrop of the emergence of a new Chinese project) can be considered a positive phenomenon, constructive competition. But one circumstance must be taken into account.

We have already noted that Trump, who has been in office for less than 2 weeks, does not have a constructive plan for restoring the US economy. There are individual projects (for example, increasing import duties), but there is no systemic plan. But one of the main projects was the AI ​​monopoly project, which was supposed to bring the US the main income in the coming not even years, but decades.

The information that American companies have real competitors (Russia and India have not yet been mentioned, and they also have something to show) could well have been a consequence of political opposition to the Trump team from the “chaos party” and its American component in the form of a group of liberal Atlanticists under the control of the Clintons. Yes, this is a purely political motive, but since it has such a strong influence on the economy, we have no right to ignore it.

The majority of the “digitalists” swore allegiance to Trump and were dealt a severe blow, effectively destroying not only their hopes for a monopoly, but also limiting their capitalization growth and opportunities to attract investment. Japan and a number of Arab investors, who were included in the total volume of $500 billion that Trump planned to attract to the industry, have already effectively taken back their commitments. The blow to Trump’s plans (and the US economy) was quite strong.

And something needs to be done, since a new round of price growth has apparently already begun. Coffee prices can be noted:

live cattle:

and, of course, gold:

Add to that a recent survey by consumer services firm Bankrate that found 59% of Americans are unable to save “to pay for a large unexpected expense, like a $1,000 emergency room visit or car repair,” the company said in a Jan. 23 report:
https://www.bankrate.com/banking/savings/emergency-savings-report/ .

Можно отметить сделанное на этой неделе сообщение в личном акаунте Трампа в сети Х:

«▪️ФРС создала проблему с инфляцией и не смогла её решить – теперь эту задачу предстоит взять на себя.

▪️Экономика – запуск добычи американской энергии, сокращение регулирования, балансировка международной торговли и возрождение промышленности.

▪️Цель – не просто победить инфляцию, а вновь сделать страну финансово и экономически мощной.

▪️ФРС провалила регулирование банковской сферы, поэтому МинФин возьмёт на себя инициативу по снижению бюрократических ограничений и обеспечению доступного кредитования.

▪️Причина инфляции – не экономика, а фокус ФРС на DEI, гендернойидеологии, “зелёной” энергетике и климатической повестке».

Такая ситуация не только в США: «Домохозяйства Великобритании ожидают рекордный рост счетов за воду, сообщает Bloomberg.

Средние счета за воду в Великобритании вырастут на 26% по сравнению с апрелем, что является самым большим ростом за всю историю для домохозяйств и предприятий, говорится в публикации.

Средний чек по стране увеличится на 123 фунта стерлингов (152,93 доллара США) с 1 апреля до 603 фунтов стерлингов на домохозяйство, что является рекордным уровнем.

Водопроводные компании и правительство объявили о необходимости повышения тарифов на воду для финансирования модернизации инфраструктуры из–за массового недовольства постоянными утечками и разливами сточных вод. В компании Water UK заявили, что они понимают трудности, связанные с повышением счетов, но инвестиции необходимы.

Повышение процентной ставки создает вызов для правительства, которое обещало избирателям снизить стоимость жизни, отмечается в публикации. Помимо этого, с 1 апреля в Великобритании ожидается повышение предельной цены на энергоносители в третьем квартале, а также рост ставки взносов в фонд национального страхования для работодателей. Эксперты предупреждают, что это может привести к сокращению рабочих мест, снижению зарплат и повышению инфляции».

Against this backdrop, the Federal Open Market Committee did not dare to lower the rate. Powell’s theses at the final press conference were not much different from the previous ones, but the questions were more pointed:

“▪️The US economy is strong.

▪️The situation on the labor market remains stable. The labor market has cooled.

▪️GDP in 2024 is likely to grow above 2%.

▪️Inflation has approached the target, but is still slightly high.

▪️The unemployment rate remains low.

▪️I am attentive to the risks on both sides of the mandate.

▪️Equipment investment has declined.

▪️We do not need to rush to lower the interest rate.

▪️We are not on course.

▪️The Fed’s monetary policy is well prepared to handle risks and uncertainties.

▪️I will not comment on Donald Trump’s words.

▪️I have not been in contact with the president.

▪️The Fed’s monetary policy has become significantly less restrictive.

▪️We began discussing the policy framework at today’s meeting, and the discussion will be completed by the end of the summer.

▪️The risks to the Fed’s dual mandate are well balanced between inflation and the labor market.

▪️The removal of the item from the cover letter about progress toward the inflation target is NOT a signal.

▪️There is heightened uncertainty due to the significant policy changes of the new administration, but this should pass.

▪️We are in a very good position now.

▪️We intend to wait and watch patiently.

▪️The economic outlook is very uncertain.

▪️We are in a holding pattern, we need to see what laws the new White House administration will pass.

▪️I expect further progress in the fight against inflation.

▪️We need to act based on US macro data.

▪️We have a strong economy, it is difficult to radically influence it with policy changes.

▪️The Fed is not taking any action until it sees more information.

▪️The Fed is currently working on a range of economic forecasts, much depends on the orders of the Donald Trump administration.

▪️There are prerequisites for further progress in the fight against inflation.

▪️There are prerequisites for further progress in the fight against inflation.

▪️I do not think that we need further cooling of the labor market.

▪️We need consistent macro data indicating progress in the fight against inflation.

▪️Migrant flows across borders have decreased, but the number of vacancies has also decreased.

▪️The last two inflation reports looked good.

▪️The Fed rate is significantly above neutral.

▪️But the Fed will not rush to cut the rate, we are in the information gathering mode.

▪️We intend to continue reducing the Fed balance sheet QT.

▪️The possible range of introduced trade tariffs is very wide, it is not yet known what will be adopted in the end.

▪️We don’t know how higher tariffs will affect consumers.

▪️The Fed is watching the AI-driven stock selloff with interest.

▪️AI innovation is a development for the US stock market, but we are focused on macro data.

▪️We don’t need to wait for 2% inflation to cut rates.

▪️Trade policy uncertainty, if significant and persistent, could start to matter. I don’t see it happening yet.

▪️We look at asset prices, leverage, and funding risk from a financial stability perspective.

▪️Some asset prices are overvalued by many metrics.

▪️If there was a surge in layoffs, we would see unemployment rise quickly as hiring remains low.

▪️There is no information about the reduction of the immigrant labor force in the macro data yet, but you can hear about it from enterprises.

▪️Economic uncertainty always remains.

▪️The risks of deterioration in the labor market have decreased.

▪️The general opinion of the Fed chairmen: we do not need to rush to cut the rate answer to the question about cutting the rate in March.

▪️The Fed will again discuss a potential revision of the employment target.”

In addition to the events already mentioned, we can note the discussion on the introduction of import duties in the USA, but since the event itself is not included in the time interval described in this Review, we will return to this topic next week.

Trump’s second week turned out to be no less active than the first, but, by and large, it raised more questions than it answered. Only one thing is clear: after Trump came to power, it quickly became clear that the old economic model can no longer exist. This, by the way, was a revelation for many both in the world and in the USA, but this certainly does not apply to our readers, whom we have been warning about this for several years. They have known the situation for a long time, and therefore we wish them a peaceful rest on the weekend and fruitful use of their knowledge during the work week!