Economists Uncut

This Week’s Must-Know Market News (Uncut) 02-01-2025

This Week’s Must-Know Market News | ft. Peter Boockvar & Andy Schwartz | Rise UP!

Welcome to Rise Up. This is where we take a look at the biggest stories each week and break them down to really help you understand what’s happening in the markets, what’s going well, what’s not going well, and how do you protect your portfolios when there’s so much going on today. My name is Terry Kallsen and I’m a managing partner at Rise Growth.

 

I’ve been a CFP all my life and leader of investor services at Charles Schwab. Very excited to be with our two co-hosts today, Andy Schwartz, who’s the founder of Gleekly Financial Group. He’s also the CEO and a CFP.

 

And Peter Buchvar, who’s the CIO and editor of the Book Report, which he shares daily macro intelligence with traders around the world. Andy and Peter, thanks so much for being with us today. Awesome.

 

Well, you know, it’s an important day. We really want to recognize some of the challenges that have happened this week, and we want to offer our deepest condolences for the victims of this week’s tragic collision, American Airlines flight and the Blackhawk military helicopter. You know, officials, even as we chart this today, we’re still trying to figure out what happened.

 

And then obviously there’s still the fallout from LA and Chubb Insurance this week highlighted that there are over 1.5 billion in claims thus far, and we’re not even done with that. Before that, as you know, it’s been a difficult time. We had hurricanes in Florida, floods in North Carolina.

 

Well, just today at Rise Up, we have published through Wealthion a new show about how to prepare for these catastrophes and how to plan for them so they don’t financially wipe us out in the process. So I want to encourage you to watch that, to listen to it, share it with your family and friends. If you haven’t subscribed yet, subscribe.

 

This is where we really want to bring value to our viewers and help you think through all the things that could happen. So the first part of our agenda today is to really go over this week’s big three. And as you know, there’s been a lot of things going on, but our first one this week is really about the Fed, the Fed versus the Fed.

 

The Fed keeps saying, you know, they’re going to keep rates the same. There’s really, they need to see more progress on inflation. And, you know, Trump, President Trump has said that the Fed has failed to stop the problem they created and have done a terrible job on banking regulations.

 

So, you know, Peter, I’d really like to get your thoughts. You know, President Trump, he’s not the only critic of the Fed, but what’s your take on the Fed move and lack of move? And what power does the president even have in this case? So the Fed sitting on their hands was well anticipated. This follows since last September, a total of 100 basis points of rate cuts on the short end of the yield curve.

 

The thing, though, that happened since was that long term interest rates went up instead. So the bond market didn’t necessarily agree with the level of rate cuts that the Fed gave up. But because of the still pretty good economic data at the headline level at around two and a half percent inflation, that’s been sort of sideways at around this 3 percent level.

 

And we can see until we get more details on the extent to which we’ll find tariffs on other countries and how and what the administration’s game plan is on how they will extend the Trump tax cuts. You know, one of the things last year that that Powell said was a trigger for him to cut rates was to have confidence in the outlook and the trajectory of inflation and growth. I think right now it’s somewhat hard to have the same level of confidence.

 

So they did the right thing by sitting on their hands. Now, with respect to Trump, this is sort of what we heard in his previous administration when he sort of tried to draw bone Jay Powell into cutting interest rates, because who doesn’t like lower interest rates? But I think this time around, just as it did last time, it’s not going to have much of an impact on what the Fed will do. The Fed will try to be as independent as possible.

 

We’ll try to focus on what they focus on and try to be less influenced by what Trump has to say. Yeah, it’s pretty hard to spend your time not being influenced on what he’s saying. But, Andy, I’d love to hear what you have to say.

 

You know, they’re pausing on rate drops. There’s new policies affecting the economy. And we talked about February 1st.

 

This is the day of tariffs. Should we be concerned about this? Well, I think the Fed made the right decision to not do anything now. The February 1st date you were alluding to would be Mexico and Canada.

 

And so far that looks like it’s 25 percent. But who knows what is going to happen? And the reality is, I think the concern that a lot of people have, not just the Fed, but markets as well, is that if they do get more aggressive on tariffs, tariffs are at least believed to be inflationary. And I think that’s our view.

 

I know Peter talks about that all the time. And so if you fear that the tariffs are coming, and one of the things that there are people out there that say, don’t worry about the tariffs because all he’s doing is basically negotiating. My concern would be is that if they want to do things that are going to change tax policy, everything’s going to have to go through reconciliation.

 

They don’t have the votes otherwise. You have to pay for reconciliation. It sounds like they all say, when I say they, the administration, that the way they’re going to pay for all these things, these tax cuts, is going to be through tariffs.

 

Well, if that’s true, then they’re really serious about collecting serious money for tariffs. If you’re going to collect serious tariff money, you’re raising prices. It’s going to be inflationary.

 

So I think the Fed is wise to wait and understand the landscape. What’s the rush? So yeah, I think that they’re right where they should be. And I think they’ll probably ignore Trump, at least for the short term.

 

Yeah. It’s really interesting. I just read an article this morning from The Atlantic saying, last week, Trump started the budget freeze right away and then retracted that.

 

It created a lot of chaos across the country. And the article actually said he’s doing this purposely to be able to move forward with his executive power. So some of these things are pretty hard to ignore, but interesting that that would be his strategy to create chaos.

 

That was the name of the article, how we can create more chaos, which is a little different approach than we’re used to, but always makes these stories really interesting. So let’s go on to our second one, which is about market volatility. We’ve seen lower GDP than expected.

 

We had the deep sea claim that they can build cheaper AI with less data and earnings reports. We’re on a big roller coaster this week. We saw NVIDIA started to come back a little bit.

 

But the market was down. The Magnificent 7 was down. There was just a lot of things.

 

People are rethinking their positions. Or is this an overreaction, Andy? I would think that it’s probably wise to rethink your position. The whole premise that has driven up the Mag 7, plus a few other companies, is the idea that AI will change the world, which it probably will, just like the internet changed the world.

 

But there’s going to be lots of winners and lots of losers. And the bottom line is that if you’ve got companies who are investing tens of billions of dollars under the assumption that they’re going to somehow win some race, and if we turn around and realize that they could have spent fractions of those dollars, and there’s payers and then there’s receivers, NVIDIA was the right loser in the deal. Because if they really can do what they say, and it looks like maybe they can, then the reality is there’s no reason for people to be spending the kind of money that they’re spending.

 

And NVIDIA won’t be the recipient. When you think about a company trading, what do they get? Are they 70%, 75% margins? The way the world works is someone’s in front, they do really well, then everybody else catches up. And then all of a sudden things get competitive, prices go down, margins go down.

 

But they’re priced to perfection. And so I think what happened on Monday makes perfect sense for NVIDIA. Also, there’s still a reflex.

 

It doesn’t necessarily mean they should, but that still seems to be the muscle memory, at least for the moment. Yeah, that’s right. And there’s been a lot of question about, is this deep seek any good? How do clients, how do prospects, how do consumers even get to the truth? Peter, can you give some information? I know you’ve got some of this in your book.

 

I know you’ve been tweeting on this on X, but how do you help consumers find the truth in all this? Well, it’s clear that deep seek sort of piggybanked on a lot of what OpenAI did. But putting that aside from everything that I’ve read and from people that have directly used the product and have analyzed it is that it’s a high quality product, similar to some of the other large models that are out there like OpenAI and what Lama has come up with. And it’s open source, which means that anybody can really contribute to it.

 

So it’s not just deep seek that’s doing all the work. There’s a lot more to it since it’s, as I said, open source. I think the point is that we learned that the dominance of building these AI models is not just located in the US.

 

It’s not just with Meta, Google, Microsoft, and Amazon, that there are other major competitors out there building similar models, particularly in China. And it’s not just deep seek. It’s Alibaba, it’s Baidu, and there are others that are building similar models.

 

So it just begs the question of whether these models get commoditized and that the ultimate beneficiaries will be lower prices and will be the users of generative AI. It’ll be businesses that integrate it into what they do to make themselves more efficient and more productive. It’ll be households that integrate AI into their daily lives to make things easier in terms of scheduling, making a restaurant reservation, or booking a trip, for example.

 

But that’s what technology, at the end of the day, does. These innovators spend a lot of money, and a lot of times it’s the consumers that benefit the most from it. But I think the point is that so much money got into these stocks, and I think deep seek was sort of a catalyst to make people rethink, can this AI tech trade continue on as is, or is this something that has changed the environment and landscape that maybe it’s time to start to better analyze the valuations that we’re paying for these stocks? Yeah, that’s right.

 

I really think this is bound to happen. It’s not just going to be in the U.S. We’re going to always have global competition. So this is our learning here, and we’ll take it forward.

 

But Peter, for our third story, you talked a lot in your book about international investment in AI, and this week’s story is all about Norway’s sovereign wealth fund set record earnings for 2023 because of their heavy investment in AI. And you pointed out on X that the Swiss national banks, say that 10 times fast, has the top nine holdings are all in tech. So a lot of people in this country and around the world are betting on AI.

 

Andy talked about it’s going to be as big or bigger than the internet was decades ago, but let’s just talk about why you think that this is important to point out this international investment in AI. So one of the big characteristics of the stock market, the U.S. stock market in the context of the global stock market of the past few years is U.S. GDP as a percent of global GDP is about 5%. U.S. corporate earnings as a percent of global profits is about 30%.

 

But U.S. market cap as a percent of global market cap is about 60%. And that’s because of the dominance of these big cap tech stocks that have just sucked out all the oxygen from the global stock market. And it’s not just U.S. investors that have piled into these stocks, it’s international investors.

 

And the point you made about Norway, they’ve done it. I pointed out the Swiss national bank that out of printed money, so money out of thin air, they used to buy U.S. stocks. They have a portfolio totaling about $150 billion and very top heavy in all the names we know, NVIDIA and Microsoft and Apple and so on.

 

So the global investor has piled into U.S. stocks to the point where we have to ask ourselves, can this continue? And at the pace that it has, or is the boat so loaded with bulls in these tech stocks that maybe it’s time to look at other things to buy? Yeah, exactly. I mean, there’s a lot of other opportunities out there. So, you know, now this is my favorite part of the show.

 

We get to hear questions from our viewers. And so we’ve got three big questions that we want to talk about. So, you know, I think one of the most important questions that are out there is, you know, DeepSeek has brought now for the very first time uncertain expectations around AI.

 

So there’s fears that for the first time ever that we’re not going to have the earnings we had initially planned for in the coming year, because NVIDIA, Broadcom and others. So, you know, even Meta, despite DeepSeek announcement, is still doubling down on their $65 billion in AI this year. And so there’s a lot of things happening.

 

Are we in a recovery? Are we not? You know, what’s going on in the AI world? So, Peter, can you answer that? Well, that’s what’s so interesting about this. If you rewind the clock a week, I don’t think people were going into the weekend thinking about DeepSeek, even though there was some chatter about this and people started to focus on it. But it was a very small universe that was.

 

So a lot of times when you get big market moves, it’s when the news comes out of nowhere. And this certainly, as I said earlier, I do think it’s if any tech investor, anybody that’s overloaded in these stocks should start to think about is what is the future from here? And just maybe a lot of these models, as incredible as they are, as I said earlier, are becoming commoditized, which means that it’s good for the ecosystem in the sense that it lowers the costs for users to integrate this into what they do every day. But I think we need to scrutinize the extraordinary stock market performance of these players that maybe their product, again, has intensifying competition around the world.

 

Absolutely. Andy, have you gone on the DeepSeek app yet? I have not. No, I have not.

 

I tried originally when, you know, because I’d never heard of it. And it was down because there were so many people going on it. So what’s the number? It’s just the number one app on Apple’s ecosystem.

 

Yeah. Overnight. So you can see, like Peter said last weekend, no one would have been talking about DeepSeek.

 

Now we all at the tip of our tongue, how the world changes. But let’s talk now about the market volatility. So, you know, we had another viewer come in and, you know, talk about 70 percent of S&P stocks actually rose on Monday.

 

But with the Meg 7 driving 33 percent of the S&P, you know, that sell wiped out a trillion in gains. So it leads us to think about the second question. We talk a lot about having balanced portfolios and really riding through the storm of volatility.

 

But what should we be thinking about for investors who are heavy in the magnificent 7 and tech? Should they be looking to rebalance or where would you send them? I mean, personally, I think that there’s a risk today because there’s a lot of FOMO in the world. You know, everybody knows somebody that bought Apple, you know, 5, 10 years ago or Microsoft or Tesla. And I think that and everybody owns the stocks, as Peter said.

 

The problem is when everybody owns a few stocks, if this thing goes south, how does anybody get out? I mean, that’s how you can have a drop in and a stock price of 15 percent a day. So to me, we’re not sellers and we’re not short sellers. So I’m not, I would never suggest that you short any of these companies.

 

These are great companies. The question you have to ask yourself is if these companies have grown so dramatically over the last 10 years and some of them are 4 trillion or were 4 trillion dollar companies, are they going to become 8 trillion dollar companies? And the answer is maybe. But the reality is, is that for us, I apologize to clients every day for being respectful of their capital and having diversified portfolios, because the truth of the matter is, if you own the S&P 500 only for the last 10 years, you were a big, big winner because 7 or 8 stocks dominated that.

 

I personally, and we own the S&P, but we own other things as well. And I think that what’s happening now, we hear it from advisors, we hear it at conferences, we hear from clients that people are starting to question, why do I own anything else? And I think we might be at an inflection point. And I think everybody should be very, very careful, because when you can own assets that are trading at half or less, I mean, we talk about this, Peter, what are we, three standard deviations now, you know, from the S&P to these other assets.

 

So I would just say, I would just caution people not to leave where they are, but I would caution people, meaning you can still own the S&P, the Russell 3000, obviously US markets, but do not leave those other assets that are so much cheaper and probably offer so much more opportunity, at least in the near term. If the tech stocks get crushless in 23, when the sovereigns, it was with the Swiss bank or it was Norway, yeah, not a bad trade, right? Because in 22, those stocks got punished. So if MED is down 40%, yeah, I’m a big buyer, I was a big buyer, but today that’s not the case.

 

So I would caution people that maybe diversification has a place and we will see, but we are going to maintain diversified portfolios for our clients for sure. Yeah. Sometimes people think diversification or the fundamentals are boring, right? But what it does, it can help you through these, you know, to really overcome some of these big drops that we’re seeing in one day.

 

And, you know, Richard Bernstein this week, he basically said it’s a really good time to push for fundamentals. And so that could be good news for stocks outside of the mag seven. So it might be time to start, are we seeing a tech bubble? I mean, I was around when we had our last tech bubble, it was not pretty.

 

So Peter, like, what are you thinking? Are we about to start a tech bubble or not? Well, the valuations in these names have gotten sort of nosebleeding and they’re market caps as well. But as Amy said, it can continue, it’s hard to figure out what the catalyst for change is. I just think that with interest rates staying elevated with the long rate, the long end of the yield curve, the 10-year yield, for example, you know, four and a half, four and three quarters and the stock market P ratio being about 20, I think it’s always prudent when you get to sort of those levels to always reassess your positioning and look for other things.

 

And the gap between our performance of big cap tech grokey stocks versus value and everything else has gotten so wide that I think we’re putting pieces into place that can result in some reversion of the meme. And there are a lot of cheap stocks out there, both domestically and internationally. And while investors continue to want to pile into the same names, we think it’s worth looking at other parts of the market.

 

Yeah, I agree. And, you know, as a CFP myself working with clients and Andy, you’re a CFP, I mean, a lot of viewers might think, well, I can time the market, I can pull out when I need to and get back in just like this week, right? That’s something I can do. You know, I’ve always thought that’s a pretty high hurdle to jump, at least consistently.

 

I’d love to know your thoughts. Yeah, I’ve been doing this for 40 years. And I would say, if someone comes to you and says, invest with me, meeting an advisor, because I’m going to time the market for you.

 

I wouldn’t tell you to walk away from that conversation. I would tell you to run away from that conversation. You know, I think physicians say what, do no harm.

 

And I think advisors should be the same. You know, my fundamental starting point is, don’t think that we’re so smart, that we’re so arrogant that we can outsmart the market, because those are the people that can really hurt you. And so we started sort of a level of do no harm and having quality, owning quality assets, having proper liquidity, having reasonable diversification or good diversification.

 

Yeah, we’re never going to be up 50% in a year because we’re not using leverage and we’re not in one asset. But at the same time on Monday, Monday was a non-event for us. I think our average portfolio was down maybe 50 basis points.

 

You know, it was no big deal, you know, because we owned so many other things other than the stocks that were being crushed. Now, with that said, on a day when NVIDIA is up, you know, 10% or 5% a day, which certainly we’ve seen those days, that’s not a big mover for us because we’re not piled in there. We own it, but we own it proportionally to some of the other things.

 

So yeah, I would be aware of advisors that think that they can outsmart the market. Because what I always say to clients is, if you have an advisor that thinks they can tie in the market and outsmart the market, why in the world would they be wasting their time talking to you? Because all they would be doing is trading their own account. They would be a billionaire.

 

They would be living on some private island somewhere and they would not want to be being annoyed by clients. So I would just say that be very, very careful with that. It’s a fool’s errand, I think, for sure.

 

And scary, and scary. Yeah, I like that word, fool’s errand. The other word I tell our viewers to listen for is fiduciary, right? If an advisor like Andy, you’re a fiduciary, your team is a fiduciary, Blinkly’s a fiduciary.

 

And what that means is they’re obligated by law, by regulations. They have to do what is best for clients and not just do no harm, but what is clearly best for clients. And so as you’re thinking about advisors during these volatile times, remember to think, get a fiduciary, someone who can really help you through the ups and downs and not be short-term thinkers.

 

All right, so now we’re to the top three stories that we’re going to think about for next week. And it’s probably going to be another week of volatility. So Peter, what are your thoughts? I think that next week is going to be another one filled with corporate earnings, particularly Amazon and Google being the two biggest after seeing some tech names this week.

 

And also next Friday, the payroll number, in addition to the ISM numbers. Payroll numbers are obviously big, even though they get revised many times. Markets respond in a big way typically to these numbers.

 

The prior month, we saw a monthly job gain of 256,000. It was not corroborated by other things. And we look for, therefore, a revision potentially, but that’ll be the big economic number.

 

And then we get to see whether Trump follows through with, as we talked about earlier, the February 1st tariffs on Canada and Mexico. We’re obviously hoping that he does not. But if he does, then there’ll be responses for sure, even Monday, if he does that.

 

So those are the things that we’ll be watching for. Yeah, I think unemployment numbers will certainly be telling for us in terms of our stability. I also think about February 1st, it’s my son’s birthday, but it’s also another big day for Canada and Mexico.

 

So, you know, Andy, what are you going to be thinking about for these tariffs and if they are enacted? Yeah, I mean, look, we’re going to have to let this play out. If they are aggressive with the tariffs, then my guess is the market’s going to react negatively. The most important thing, I think, for clients is to try not to focus on the short term.

 

You know, I don’t want to say that I don’t care, you know, what happens on February 1st, because obviously we care. But at the end of the day, you know, Nick Murray is a wonderful, you know, in our industry, and I don’t know if you’ve ever gone to a Nick Murray seminar. Nick Murray said something, I was at a seminar and he said something that I’ll never forget.

 

So he said client calls and the market’s up or it’s down. So the market’s down today and the client calls and he says, Nick, you know, the market’s down. He goes, well, you know, I’m not really sure where the market is today.

 

Do you want me to turn on my TV and check? And the point is, does it really matter? And I would argue that it doesn’t really matter. If it matters where the market is in one day, the day he announces tariffs, maybe they do the tariffs, maybe they don’t, then you’re not invested properly. Because the reality is, if you’re that short term and you’re thinking that should be in treasury cash, because that’s liquid money.

 

We invest money for, you know, for the longer term. So for the clients that are in equities, that’s a three year, four year, five year sort of outlook. The first three years we have set aside.

 

So again, that takes us away from this idea of trying to outsmart and time the market, because again, you’re going to lose. But I would say that if the markets fall enough, then and some of these stocks get cheaper, we’ll be happy to buy them. You know, and so because we want to have whatever we’re buying, we just want to know that there’s value.

 

We want to own quality assets that offer some reasonable value. You know, growth at a reasonable price, I guess, is what, you know, our health care manager, David Miliband, who does a great job for us, likes to say he’s not a value manager. He’s a growth manager, but at a reasonable price.

 

So, yes. So again, look, we’re watching the news. You know, we have to know what’s going on, but we’re not going to react day to day to what’s happening in the marketplace, because if everybody’s running around reacting day to day, especially with President Trump, because as you said, he really likes to mix it up.

 

He likes to create chaos. He likes to create noise. He’s going to be on TV every single day for the next four years.

 

People have to just kind of chill a little bit, relax. A lot of what he says is hyperbole. We can’t be reacting to all of it because it’s so we’re going to exhaust ourselves and we’re going to make mistakes.

 

And so, but yes, we are definitely watching and interested in what’s going to be happening over the next couple of weeks in the financial news. I agree. You know, I’m so glad you mentioned Nick Murray.

 

I have been to a couple of his sessions, but one of the books that I recommend our viewers actually read is called Behavior Investment Consulting, Behavior Investment Consulting by Nick Murray, because that’s exactly what you’re talking about, right? I’m investing, but what are my behaviors? Am I short-term? Am I long-term? Am I reacting? Am I selling? Am I buying? How am I feeling the fear, the anxiety? Well, this book can really help a viewer really understand how they behave during this volatility. So I’m really glad you mentioned that. And I’d also just like to thank viewers for coming.

 

I’d invite you back next week because I think we’re going to have another big week of news of volatility, maybe some anxiety, but we could be, you know, your Friday afternoon relaxation moment where we can help you. We can help you think these things through. We can help you with your behaviors and your actions so that you’re always growing and protecting your portfolio for the long run because we want you to hit your lifetime goals.

 

So, you know, again, please comment, please send questions, subscribe, but thank you again for watching Rise Up.

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