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DID NOT HAPPEN AS EXPECTED, AND NOT IN FAVOR OF THE MARKETS

January 13, 2025by toleg.work
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Starting on a high note with Nvidia CEO Jensen Huang’s address, the first full trading week after the holiday break reaffirmed the main investment themes: inflation, interest rates, and AI. Meanwhile, the so-called “Trump trade,” tied to Trump’s election-driven changes, appears to be losing momentum. This is a quick review from Ivan Kompan, Edinburgh Business School analyst.

“Physical AI is the next frontier!” declared Jensen Huang at the Consumer Electronics Show 2025 in Las Vegas. He explained that, unlike generative AI, which processes and generates media, physical AI interacts with the physical world. Autonomous vehicles will likely be the first widely adopted physical AI. Backing his claims, Huang unveiled the Blackwell processor family, the Project DIGITS workstation for AI prototyping, and the Cosmos platform for developing physical AI systems. He also announced partnerships with Toyota and advancements in AI tools for developers. While the announcements briefly lifted Nvidia’s stock, concerns about AI being overhyped and the broader economic environment tempered gains by week’s end.

Investor fears linger over inflation and Federal Reserve policy. Hopes for a quick rate cut faded as U.S. 10-year Treasury yields rose to 4.8%, their highest since April, making equities less attractive compared to bonds. High rates mean companies face pricier debt refinancing, pressuring growth.

Midweek, the Fed’s meeting minutes highlighted uncertainty about the Trump administration’s trade, immigration, and fiscal policies, predicting slower GDP growth, higher unemployment, and stagnant inflation for 2025. This dimmed optimism, further reducing the likelihood of rate cuts.

Capping the week, December’s jobs report showed 250,000 jobs added (versus the 155,000 forecast), and unemployment fell to 4.1% from 4.2%. While the strong labor market reflects economic health, it also strengthens the Fed’s resolve to keep rates high, challenging equity markets.

*And finally, we would like to remind you that the information you have just listened to is not an investment advisory. Remember – investments in the stock market are always tied up with financial risks. So be careful and cautious.

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