This week in the markets…
This week started off with a real bang as the markets reacted to two very important new realities. The first is that AI and the required incumbent investment, may both be elevated beyond reality.
On Sunday, we found out that a Chinese AI lab called DeepSeek, released a free, open-sourced large language model (LLM) that can outperform America’s best open-sourced LLM’s (think Chat-GPT), and that model took two months and $6,000,000 to build. (Wu, 2025) Markets around the world “freaked out” to put it mildly on Monday. Why? The US is pumping billions of dollars into AI supremacy. Just last week, Google announced a $1B investment in Anthropic, an AI startup. (Field, 2024)
DeepSeek took two months and $6MM to do what the US is investing years and billions of dollars into doing. Markets are now adjusting to a new paradigm. Is DeepSeek real? Is it a reflection of China’s great skill at reengineering or did the whole sector just become a bloated inefficient carcass floating on the surface of very deep water? NVIDIA’s stock price felt the pressure most acutely, falling 17% on Monday, representing a market cap loss of $600 billion. To put that in perspective, that’s more than the market value of both Oracle and Netflix, and more than double the market cap of Coca-Cola and Chevron. (Rozzelle, 2025) It’s too early to tell what the reality within the AI space is, but tech is under pressure and will likely remain so for a while.
| 1/29/2024 | 1/1/2025 | 1/27/2025 | 12 MO ROR | YTD ROR | |
| DOW | 38,333.45 | 42,544 | 44,713.58 | 16.51% | 5.34% |
| S&P 500 | 4,927.93 | 5,881.63 | 6,012.28 | 23.11% | 3.08% |
| NASDAQ | 15,628.04 | 19,310.79 | 19,341.83 | 26.75% | 1.80% |
Tech earnings will dominate earnings this week. Meta Platforms, Microsoft and Tesla announce their earnings on Wednesday, followed by Apple on Thursday — analysts think the reports could determine the direction of markets (Ping, 2025).
The second reality this week is that the Fed is likely to pause rate cuts in the January meeting this week. The January Fed meeting begins today and will culminate in a policy announcement tomorrow at 2:00pm Eastern with a statement from Chairman Powell at 2:30pm. This will be a press conference that everyone on the street will be watching (Blaine, 2025). According to the CME Group’s Fed Watch Tool, there is almost no chance of a rate cut. According to the CME Group’s FedWatch tool this week, the Fed will hold its key federal funds rate at 4.25% to 4.5%, a level set in December. There may not be a rate cut until June (Blaine, 2025).
This week has been exciting so far, and will likely remain that way until Friday as reactions to DeepSeek, Fed policy and earnings continue through Friday. Throw in a dash of geo-political intrigue between the US, Mexico, Colombia, Brazil and China and we should have a fully confusing environment that should make Saturday a welcome sight. We’re working for the weekend this time folks.
U.S. Treasury
Bond Yields
| US1MO | 4.34% |
| US3MO | 4.293 |
| US6MO | 4.278 |
| US1Y | 4.237 |
| US2Y | 4.229 |
| US3Y | 4.279 |
| US5Y | 4.389 |
| US10Y | 4.564 |
| US30Y | 4.810 |
Sources:
- https://www.thestreet.com/fed/will-fed-officials-drop-a-bombshell-on-interest-rates
- https://www.cnbc.com/2025/01/22/google-agrees-to-new-1-billion-investment-in-anthropic.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail
- https://www.cnbc.com/2025/01/27/cnbc-daily-open-gold-prices-might-be-a-warning-to-bull-market.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail
- https://www.cnbc.com/2025/01/28/5-things-to-know-before-the-stock-market-opens-tuesday-january-28.html
- https://www.cnbc.com/2025/01/24/how-chinas-new-ai-model-deepseek-is-threatening-us-dominance.html
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