AI, Crypto, and Tariffs: Inside the Economic Rollercoaster of 2025 (Weekly Cheat Sheet)

If the stock market were a roller coaster, we’d all be walking away with our hair blown back and a slight case of whiplash. But in a good way, if you can believe it. The major indices put on quite a show, with gains across the board that would make even the most stoic investor crack a smile.

Let’s break it down:

  • The Dow Jones Industrial Average strutted its stuff with a 2.2% increase. Not too shabby for the old blue chips.
  • The S&P 500 and Nasdaq Composite both climbed 1.7%, like synchronized swimmers in a sea of green.
  • Even the little guys got in on the action, with the Russell 2000 up 1.4% and the S&P Midcap 400 rising 1.1%.

Ten out of eleven S&P 500 sectors ended the week in positive territory. The communication services sector led the charge with a 4.0% gain, while consumer discretionary brought up the rear with a still respectable 0.8% increase. The only party pooper was the energy sector, which dipped 2.9%. More on that later.

Bonds and Treasuries

Over in the bond market, things were calmer than a zen garden. The 2-year Treasury yield held steady at 4.27%, unmoved by the week’s excitement. Meanwhile, the 10-year yield barely raised an eyebrow, inching up just two basis points to 4.63%. This stability in the bond market was like a sturdy foundation, supporting the stock market’s upward climb.

The U.S. Dollar Index took a bit of a tumble, dropping 1.7% to 107.47. As we’ll see, this had some interesting ripple effects in other markets.

US Markets

Hold onto your hats, because this week was one for the history books. Donald J. Trump was sworn in as the 47th President of the United States on Monday, which also happened to be Martin Luther King Jr. Day. Talk about a day off with a bang.

When the markets reopened on Tuesday, they hit the ground running like a caffeinated jackrabbit. President Trump wasted no time making his presence felt, declaring a national energy emergency and firing off executive orders like a t-shirt cannon at a basketball game.

Interestingly, what caught the market’s attention wasn’t what Trump did, but what he didn’t do. There was no mention of tariffs on China, which sparked a relief rally that had bulls charging down Wall Street. However, the president did float the idea of 25% tariffs on Canada and Mexico, potentially starting February 1. It seems our neighbors might be in for an interesting ride.

The tech sector got a turbo boost from the announcement of a $500 billion AI infrastructure initiative dubbed “Stargate.” This collaboration between OpenAISoftbank, and Oracle had investors salivating over the potential for innovation and growth in the AI space.

Netflix decided to crash the party mid-week with an earnings report that had Wall Street doing a double-take. Their subscriber growth numbers were so good, I half expected Reed Hastings to start handing out free popcorn. This, combined with strong showings from Dow components Procter & Gamble and Travelers, helped push the S&P 500 to new all-time highs.

By Thursday, we were looking at a record closing high for the S&P 500. It was like watching a perfectly choreographed dance, with blue chip stocks leading the way and the broader market following in step.

Global Markets

President Trump’s virtual address to the World Economic Forum in Davos was like throwing a stone into a pond – the ripples were felt far and wide. He put pressure on OPEC and Saudi Arabia to lower oil prices, which had energy traders reaching for their antacids.

The president also called for NATO countries to increase defense spending to 5% of GDP. I can almost hear the collective groan from finance ministers across Europe.

In a move that had multinational corporations perking up their ears, Trump proposed a carrot-and-stick approach to foreign companies manufacturing in the US. Lower tax rates for those who bring jobs stateside, and the threat of tariffs for those who don’t. It’s like a game of economic musical chairs, and nobody wants to be left without a seat when the music stops.

But the real showstopper was Trump’s comments on interest rates. He suggested he knows more about them than Fed Chair Powell, which is a bit like saying you know more about painting than Picasso. This raised eyebrows higher than the interest rates themselves and cranked up the anticipation for next week’s FOMC meeting to eleven.

Commodities & Crypto Corner

Energy

The energy sector this week was like watching a game of tug-of-war. On one side, we had President Trump calling for increased oil production to lower prices. On the other, we had the reality of OPEC’s fiscal needs and the economics of US oil production.

Brent crude traded down to $77.90, while WTI hovered around $75. It’s worth noting that the EIA reported a ninth consecutive week of declining US crude oil inventories, dropping by 1.02 million barrels. This comes despite a reduction in refinery utilization rates, mainly for maintenance.

The big question now is whether Trump can convince OPEC to dance to his tune. Given the fiscal needs of key members like Saudi Arabia to balance their budgets, it might be a harder sell than getting teenagers to clean their rooms.

Metals

Despite fears of trade retaliation following Trump’s tariff talk, industrial metals showed surprising resilience. Copper in London traded at $9,232 for the cash price, while aluminum held steady at $2,623. It seems the prospect of economic recovery in China and hopes for a potential US-China trade agreement are providing support.

Gold, always the drama queen of the metals world, seized the opportunity presented by a weaker dollar to shine. The precious metal reached a three-month high of $2,775 per ounce, heading for its fourth consecutive weekly gain. It’s like watching a phoenix rise from the ashes, if the phoenix were made of gold and the ashes were made of dollar bills.

Crypto

Hold onto your digital wallets, folks, because the crypto world just got even wilder. Bitcoin hit a new all-time high of over $109,000 this week. But that’s not even the craziest part.

President Trump, never one to miss out on a trend, launched his own cryptocurrency called “TRUMP” just two days before his inauguration. This digital token, clearly identified as a memecoin (read: about as useful as a chocolate teapot), reached a valuation of $15 billion at its peak before melting down by 58%. It’s like watching a financial firework – spectacular, brief, and potentially hazardous if you get too close.

But the real surprise came at the end of the week when Trump signed an executive order entitled “Strengthening American Leadership in Digital Finance Technologies.” This order includes amendments relating to the adoption of stablecoins, protection of public blockchains, and the creation of a task force to evaluate the feasibility of a national stockpile of digital assets. It’s like the government decided to throw its hat into the crypto ring, and now we’re all waiting to see if it’s a fedora or a dunce cap.

Key Events & Calendar

Alright, market watchers, it’s time to batten down the hatches because next week is shaping up to be a perfect storm of market-moving events.First up, we’ve got the Federal Reserve’s first interest rate decision of the year on Wednesday.

After three straight meetings of rate cuts to close out 2024, the economic data since has recalibrated expectations faster than a GPS rerouting after a wrong turn. The Fed is widely expected to hold steady this time, but as we’ve learned, anything can happen.On the earnings front, we’re about to be hit with a tidal wave of reports. Four of the Magnificent Seven companies are stepping up to the plate:

  • Microsoft and Meta Platforms on Wednesday
  • Tesla also on Wednesday (Elon Musk on an earnings call? Get your popcorn ready)
  • Apple on Thursday

But wait, there’s more! We’ve also got reports coming from BoeingStarbucksIBMVisaCaterpillar, and Intel. It’s like a who’s who of corporate America decided to have a party and we’re all invited.

The economic calendar is packed tighter than a sardine can. We’ll be getting an update on U.S. gross domestic product growth, which should give us a good idea of how the economy fared in the final quarter of 2024.

We’ll also get a reading on the Fed’s favorite inflation gauge – the core personal consumption expenditures (PCE) price index. This number is like catnip for economists and could give us clues about the Fed’s next moves.

As we navigate these choppy waters, I’m reminded of a piece of investing wisdom that’s served me well over the years: “The stock market is a device for transferring money from the impatient to the patient.” It’s attributed to Warren Buffett, and it’s as true today as it ever was.

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