The Week in the Markets
Summary
Second consecutive week with the main indices in the green and with a lot of breadth (meaning all stocks are rising, and the indices are not in the green solely because of the Mag7, as has been the case for much of the last two years).
The week has been primarily marked by the appointment of Trump as the new President of the United States and the first actions he has taken as the leader of the world’s leading power, which we detail in the following section. His main impact on the markets has been in the energy sector, where his ambition to promote production and maintain low prices to support industrial development has pushed oil prices down by more than 3% this week.
Similarly, the absence of tariffs during this first week of his mandate, which had been his flagship measure, has also weakened the dollar (after many months of gains). We believe that the U.S. is interested in a weaker dollar than it currently has, and the measures and messages he takes will also be geared toward this goal.
The strong start to earnings season (highlighting Netflix’s tremendous numbers, which we discuss in more detail later) and the positive reception of current initiatives have led the VIX to close below 15 (we haven’t seen it stay in this zone for many months, and we are on the eve of the most important week of this earnings season).
The main winners this week have been international markets (from a U.S. perspective), which have breathed easier due to the initial absence of tariffs (and so have their currencies).
It is worth noting the new all-time highs reached by Bitcoin this week after the signing of an executive order to create a strategic Bitcoin reserve.
Also, a reminder that this Friday marked the end of the blackout period, meaning companies can now resume buybacks.
This coming week is of tremendous importance…
Highlights of the week
It has been a week with very few relevant macroeconomic data points. The most important event of the week, and what has moved the markets, has been the inauguration of Trump as the 47th President of the United States and the wide range of executive orders that have been signed.
- Tariffs : Surely the main theme of Trump’s campaign, which has not yet been officially announced (closing Friday). The direct effect of this has been the fall of the dollar (but little impact on the U.S. 10-year Treasury). He threatened Canada and Mexico with a 25% tariff starting February 1 for allowing immigrants and drugs into the U.S. On Friday, he stated that he wouldn’t want to impose tariffs on China. With Russia, they seem willing to come to an understanding to end the war (note the ruble as the best-performing currency of the year).
- IA: Trump has announced Stargate, a $500 billion private investment initiative to develop AI infrastructure in collaboration with OpenAI, SoftBank, and Oracle, which have committed $100 billion for its initial phase. The project will build 20 massive data centers, the first already under construction in Texas, aiming to accelerate AI development, create over 100,000 U.S. jobs.
- Energy: Re-prioritized oil and gas as an economic driver, suggesting that with the largest amount of oil and gas in the world, they will use it with the goal of reducing prices or turning the U.S. into a manufacturing superpower. He declared a national energy emergency, reversing policies such as electric vehicle mandates and wind energy projects from the Biden era, and announced the U.S. withdrawal from the Paris Agreement, while halting the expansion of onshore and offshore wind projects. It has had a negative impact on renewables and on oil prices.
- Crypto Trump signed an Executive Order establishing a Presidential Task Force on Digital Asset Markets to develop a regulatory framework for cryptocurrencies. The Executive Order tasks the group with drafting a regulatory framework and creating a national digital asset reserve strategy. It also prohibits ALL government agencies from taking any action to establish, issue, or promote central bank digital currencies (CBDCs)
Interesting Data about markets this week & YTD
As we saw in the initial one-pager, strong decline of the dollar (we measure it in the dollar index vs. the currency basket, so the correlation between red in the initial one-pager and green in this one is direct). Notable are the Russian Ruble and the Polish Zloty (the former, in particular, has had a spectacular start to the year with the arrival of the new administration in the White House). Regarding the indices, Poland stands out with a very strong start to the year (from here, we have the analyses of AutoPartner and InterCars available on the website, as it is a geography that some members of our team have been analyzing for many years).
Strong rebound for Moderna, which last week was appearing as the worst YTD, and a tremendous rise for Netflix due to the fantastic results we detailed earlier. In Europe, a collapse for Puma and a good week for the banking sector.
Earning Season 1Q25
Next week is the most important of the earnings season as 4 of the Mag7 (Apple, Microsoft, Tesla, and Meta) report, and it will likely set the tone for the rest of the season. Regarding the industries we follow most actively, we have results from boat manufacturers (which have seen strong gains this week due to MarineMax’s earnings report) and several restaurants. But the bulk of results, both in Europe and the US, for us, starts in 10 days.
The most notable of this week, which ends today, are the spectacular results from Netflix. With $10.25Bn in revenues, it surpassed initial estimates and rose 16% YoY (+18.91 million net streaming subscriptions (+44% YoY)). Getting into more detail: EPS: $4.27 (+102% YoY), Operating margin: 22.2% compared to 16.9% last year.
