It’s only been a week, but it’s already a new world under Trump. Last week started off on Sunday night with The Village People singing and dancing their hit “YMCA” in a pre-inaugural rally with President Trump doing his iconic dance along with them. On Day One, Trump implemented a slew of executive orders that can only be seen as “shock and awe.” Then, immigration raids began on Day Two, with the deportation of criminals and gang members. Daily headlines will lead our attention back and forth like a tennis match, but the most important trends for investors to monitor are Treasury yields, the strength of the U.S. dollar, a potential ceasefire between Russia and Ukraine, and that “one big, beautiful tax and spending bill” that Congress may pass—or perhaps two bills if some members of Congress balk at one.
The World Economic Forum at Davos, Switzerland coincided with President Trump’s first week in office. President Trump addressed the Forum on Thursday and their reactions were interesting, especially during his answers to selected questions. For instance, President Trump was fairly hostile to the EU bureaucracy in Brussels. He also asked OPEC to lower crude oil prices and asked central bankers to lower key interest rates. He was also ready to end the war with Russia and said he planned to meet with Vladimir Putin.
Here are the most important market news items and what this news means:
• The stock market sold off on Monday with concerns that the Chinese AI service DeepSeek was substantially cheaper than OpenAl. Despite a sell-off in Nvidia that is leading a NASDAQ correction, under no circumstances is Nvidia about to lose its market dominance due to a Chinese software app.
• President Trump’s embrace of AI infrastructure and his criticism of the European Union harassing U.S. technology companies with fines as well as extra taxes at Davos clearly signaled that his administration wants to assert U.S. technology dominance.
• If you need any evidence that President Trump wants to win, just look at what happened to the immigration dispute with Colombia. After Colombia initially refused to accept two U.S. military planes deporting migrants, President Trump immediately imposed a 25 percent tariff on all Colombia goods imports to the U.S. Then Colombia abruptly reversed its policy. White House Press Secretary Karoline Leavitt said in a statement that the “Government of Colombia has agreed to all of President Trump’s terms, including the unrestricted acceptance of all illegal aliens from Colombia returned from the United States, including on U.S. military aircraft, without limitation or delay.”
• Treasury bond yields have declined this week, which will make this week’s Federal Open Market Committee (FOMC) statement more interesting. President Trump’s call for central banks around the world to cut key interest rates is happening naturally since much of the world is in a recession. The FOMC statement will be critical on Wednesday and hopefully spark a stock market rally if the Fed remains dovish.
• Existing home sales are now running at the slowest pace since 1995. It is imperative that mortgage rates decline to boost U.S. home sales since higher home sales boost the demand for more durable goods and help the manufacturing sector recover.
• Speaking of durable goods, the Commerce Department announced on Tuesday that durable goods orders declined 2.2 percent in December. This is the fourth time in the past five months that durable goods orders have declined. Transportation orders plunged 7.4 percent in December. Excluding transportation, durable goods orders actually rose 0.3 percent in December. Also interesting is that excluding defense orders, durable goods declined 2.4 percent in December. I expect that under Trump 2.0, durable goods orders will finally improve, but the faster interest rates decline, the more durable goods orders will rise.
In summary, the narrative that a Chinese app like DeepSeek is going to derail Nvidia and other technology leaders is not going to persist since the last thing Donald Trump wants is for China to win the AI race. Fortunately, this is the biggest week for earnings announcements, so I am expecting wave after wave of earnings to come out and dropkick and drive our fundamentally superior stocks higher. I should also add that it is too late to sell stocks before their earnings announcements. Challenges to investor confidence prior to their earnings announcements are common and will disappear as earnings announcement season heats up.
