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AI and The Fed Last Week, Tariffs This Week

Scott Poore, AIF, AWMA, APMA

Updated: Feb 10




The Fed is in pause mode and AI found a disruptor.

The introduction of DeepSeek the previous week caused over-valued tech stocks to pull back. DeepSeek was advertised as cheaper than existing AI engines and more effective. The early returns show that the performance of the new AI player is as good as advertised, but the cost savings, especially R&D, might be in doubt. Regardless, Mag 7 stocks took a hit, which Nvidia taking the brunt. It's not too late to explore other asset classes that may not be as over-valued as Tech and Mag 7. Several sectors, including Financials, Healthcare, and Consumer Defensive, were up more than 1% as Tech was down more than 3%.


In a week already marred by volatility, we have a Fed meeting to deal with, as well.

On Wednesday, the Fed maintained Fed Funds Rates at 4.5%. This did not come as a shock, as the market had priced in a no rate change scenario. Noted "Fed Whisperer" Nick Timiraos believes the Fed is "firmly on hold" with regard to policy rate decisions. This will make fundamentals matter more moving forward. Speaking of fundamentals, the markets were reeling overnight as President Trump has promised 25% tariffs on Canada and Mexico and a 10% tariff on China. This will impact consumers and GDP. However, in the previous tariff wars in 2018-19, certain sectors of the market continued to out-perform. There is still much to be determined with regard to tariffs as Trump has vowed to have discussions with both Canada & Mexico, so the jury is still out, but expect volatility to stick around this week.

 

Disclosures


The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.


Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.


Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.


Past Performance does not guarantee future results.

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