To The Moon

Last weekly recap>> The stock market may be hurt the most by Trump’s tariffs after January's rally

• The $.SPX(.SPX)$ and $NASDAQ 100(NDX)$ declined by 0.99% and 1.35% last week as DeepSeek rattled the stock market.

• Major market movers included $NVIDIA(NVDA)$ (-15.8%), $Microsoft(MSFT)$ (-6.5%), $Broadcom(AVGO)$ (-9.6%), $Oracle(ORCL)$ (-7.4%), $Apple(AAPL)$ (+5.3%), $Meta Platforms, Inc.(META)$ (+6.4%), $Salesforce.com(CRM)$ (+2.3%), and $Wal-Mart(WMT)$ (+3.6%).

1. Things You Should Know Before Starting Your Week

1) DeepSeek Shook the AI Sector, but AI Software Companies Emerge as Winners

• US tech stocks, particularly hardware and chip design companies like Nvidia, Broadcom, Marvell, TSMC, and Texas Instruments, are still recovering from the steep selloff triggered by DeepSeek.

• However, the $Invesco S&P 500 Equal Weight ETF(RSP)$ has risen 3.43% year-to-date, suggesting that this year's market rally has shown greater breadth rather than focusing solely on tech stocks.

• Despite the sharp tech selloff caused by DeepSeek, the Bloomberg Magnificent 7 Total Return Index has still returned 2.48% year-to-date (or -0.83% week-to-date), indicating that investors have not lost interest in Magnificent 7 stocks.

• The success of DeepSeek is likely to benefit AI software stocks, as they can now take advantage of lower AI computing costs. Beneficiaries include the $iShares Expanded Tech-Software Sector ETF(IGV)$ , $Snowflake(SNOW)$ , $Salesforce.com(CRM)$ , $Palantir Technologies Inc.(PLTR)$ and $CrowdStrike Holdings, Inc.(CRWD)$.

2) Trump’s Tariffs Are Finally Here—And Equity Markets Don’t Like It

Trump has imposed tariffs on imports from Mexico, Canada, and China.

• Canada: A 25% tariff on all imports, except for energy products, which face a 10% tariff.

• Mexico: A 25% tariff on all imports.

• China: An additional 10% tariff on all imports.

Retaliatory Tariffs:

• Canada: A 25% retaliatory tariff on $155 billion worth of U.S. goods.

o   A $30 billion portion of these tariffs takes effect on Feb. 4.

o   The remaining $125 billion will be implemented in 21 days.

• Mexico: The Mexican government will announce tariff details on Monday.

3) The U.S. May Further Clamp Down on AI Chip Exports to Curb China’s AI Capabilities

• Some U.S. lawmakers are urging for tighter export controls on $NVIDIA(NVDA)$ ’s AI chips.

• Nvidia currently holds a 5.9% weighting in the $SPDR S&P 500 ETF Trust(SPY)$ , 7.7% in the $Invesco QQQ(QQQ)$ , and 7.1% in the Philadelphia Semiconductor $iShares Semiconductor ETF(SOXX)$ .

• Continued weakness in Nvidia’s stock could drag down these broad market indexes.

2. Key economic events this week:

Monday: ISM Manufacturing PMI

Tuesday: JOLTS Job Openings

Wednesday: ADP Non-Farm Employment, ISM Services PMI

Thursday: Unemployment Claims

Friday: Non-Farm Payrolls, Unemployment Rate

3. Major earnings reports this week:

Monday: $Palantir Technologies Inc.(PLTR)$

Tuesday: $PayPal(PYPL)$ , $Pepsi(PEP)$ , $Pfizer(PFE)$ , $Spotify Technology S.A.(SPOT)$ , $Alphabet(GOOG)$ , $Advanced Micro Devices(AMD)$ , $Enphase Energy(ENPH)$

Wednesday: $Walt Disney(DIS)$ , $Uber(UBER)$ , $Novo-Nordisk A/S(NVO)$ , $ARM Holdings(ARM)$ , $Qualcomm(QCOM)$ , $Forward(FORD)$ , $Skyworks Solutions(SWKS)$ D

Thursday: $Eli Lilly(LLY)$ , $Roblox Corporation(RBLX)$ , $Amazon.com(AMZN)$

4.Conclusion

• U.S. indexes are poised to open lower on Monday, primarily due to Trump’s tariffs and retaliatory tariffs.

• However, Trump’s tariffs may serve as a negotiation tool to address issues such as border security and the fentanyl crisis. If progress is made on these fronts, we could see a policy reversal on the tariffs.

• U.S. stocks look vulnerable this week, as global investors may rotate funds into other markets with cheaper valuations. However, any such rotation is likely to be short-lived, as the broader secular trend remains AI, with U.S. AI stocks as the primary beneficiaries.

• I remain constructive on the U.S. equity market in 2025. The preferred strategy this week is to accumulate broad-based index ETFs on weakness, including:

S&P 500 ETFs: $SPDR S&P 500 ETF Trust(SPY)$ , $Vanguard S&P 500 ETF(VOO)$ , $iShares Core S&P 500 ETF(IVV)$

Nasdaq-100 ETF: $Invesco QQQ(QQQ)$

Semiconductor ETFs: $VanEck Semiconductor ETF(SMH)$ , $iShares Semiconductor ETF(SOXX)$

Magnificent Seven ETF: $The Magnificent Seven ETF(MAGS)$

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