Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Chief Macro Strategist
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Key Stories from the past week: All-out action-packed week
Saxo
Markets were frazzled early in the week on the DeepSeek story. Saxo saw a surge of trading activity in Nvidia as the company lost $465b of market cap in one day - a strong skew to long positions as clients looked to “buy the dip”. Activity also spiked in US tech names midweek as Microsoft, Meta, Tesla & Apple all reported earnings. Meanwhile, markets saw multiple central bank meetings, gold & silver prices soaring, a cracking January for European indices, and ongoing tariff action from US President Trump. More below on this week’s key stories.
China’s open-source AI model makes its impact
The story of the effectiveness and efficiency of Chinese AI model Deepseek caused a significant volatility event in equity markets. Monday saw the S&P 500 -1.5% and Nasdaq -3%, driven by AI-sector turmoil. Nvidia collapsed 17%, while later assessment turned more bullish on the development.
The Deepseek winners emerge
Major corporate earnings
There was a deluge of earnings updates from many of the world’s largest companies. Microsoft, Tesla, Meta, Apple all reported while in Europe ASML jumped 5.8% after beating estimates, Schneider, Siemens, and SAP led tech gains. LVMH sank 5% on weak H2 results.
Tech titans’ earnings - A mixed bag for investors
Central bank policy
The US Federal Reserve kept the policy rate unchanged at the 4.25-4.50% range as expected and indicated it was in no rush to make further rate cuts. The Bank of Canada sliced a further 25bps from its policy rate dropping it to 3.00% with Governor Macklem concerned over tariffs. The ECB cut by 25bps as expected, taking the deposit rate to 2.75%. The market has fully priced 75bps of further cuts by December.
Central banks are a sideshow when on Tariff watch
Will we see the first major US Tariffs?
Trump is steaming towards implementation of tariffs in Mexico, Canada and China citing his 1st Feb deadline while aides aim to limit the potential damage of 25% tariffs on $900bn of goods. USD firmer heading into the weekend.
Trump aides hunt for 11th-hour deal to dial back Canada-Mexico Tariffs
Next week we move into February and important earnings continue with the likes of Alphabet on Tuesday, Novo Nordisk on Wednesday, Amazon on Thursday, and many more throughout the week. For data releases, the US labour market will in focus with both JOLTS (Tues) and NFP (Fri). And the key economic event to watch in the UK will be the BoE policy decision on Thursday.
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