🍔Market About to Stall

Find out which factor is outperforming everything! Details inside.

Last Sunday we said the market would rebound, and rebound it did! We’ve been calling for a rally even as many famous investors and research houses called for a crash. We stuck to our long positions and even suggested adding to stocks breaking out of consolidation patterns. How did we know the selloff was over? By market timing of course.

Analysts like to predict crashes

Our steadfast belief in the durability of this bull market, supported by strong economic and earnings fundamentals, has kept investors on the winning side of the trend. So imagine what your portfolio could look like if you could capture all of the upside without the associated risk…

AI revival

This week Trump announced “Stargate Project”, a $500B joint venture to build AI data centers in the US. This is said to be the largest AI project in history. Funding would come from Oracle, Japan’s Softbank, UAE’s sovereign wealth fund; and also involve contributions from OpenAI, ARM, Nvidia, and Microsoft.

Trump has declared AI development an emergency, thereby allowing his government to remove regulatory obstacles and divert funds to the project. According to him, winning the AI race is vital for national interests, especially as other countries are also pouring huge amounts into R&D. To be sure, the US already spends more than 2x the rest of the world on R&D. Nevertheless, it’s an important pursuit as AI can further key areas like defense, cybersecurity, energy infrastructure, healthcare, cost efficiencies, and probably some uses they don’t want us to know about.

It’s clever that they’re using a public-private partnership — this way the US government can provide fiscal stimulus (jobs and efficiency) without spending any money. It is said that Stargate will create 100K jobs over the next several years. Remember what we said last week: Jobs and disinflation are Trump’s guiding stars.

Make no mistake, in the government’s eyes, AI has been elevated to the status of defense spending. Stargate is equivalent to fiscal stimulus (a.k.a. industrial policy) for tech firms. We are going to see a burgeoning of semiconductor manufacturing, data center buildouts, software, and energy infrastructure all made in USA. We expect this to extend the current AI bubble for another several years at least.

Tariff updates

As expected, Trump announced a bundle of executive orders and priorities. We were correct that tariffs would be softer than expected. Heck, he was more adamant on tariffing Canada and Mexico than China! Our view continues to be that tariffs will be gradual and targeted; and that deals will be struck with other countries to avoid the nuclear option of universal tariffs. This should ease investors’ inflation concerns and boost stock markets.

Regarding China tariffs, he will issue a memorandum on trade but would “rather not” impose tariffs (what happened to 60%?!) China indicated that they are willing to negotiate for the time being. Their high fix of the Yuan a couple weeks ago, in advance of Trump’s inauguration, shows that they are willing to play ball with the US.

Even if tariffs come into play, they aren’t that big of a concern because the currency will offset it. We saw this in 2018 as the 17% tariff on China was offset by a 15% currency depreciation, negating the impact. It is our view that the bond market has overreacted the past few weeks. As cooler heads prevail, US yields should continue their decline — congrats to our subscribers who traded bonds on the long side.

Drill, baby, drill

Energy sovereignty was also named a key priority. “Drill baby drill” is the name of the game as Trump declared an energy emergency…

The rest of this article is for paid subscribers. Upgrade now to continue reading:

• US energy sovereignty

• New earnings scorecard

• Big breadth improvement

• The real fear gauge

• Markets are about to stall

• Small caps vs tech

• Winning stocks keep winning!