To The Moon

Tuesday (11 Feb 2025) was the first of a 2-day semiannual monetary policy report meeting by Fed chair, Mr Jerome Powell with US Congress.

In his address to the Senate Banking Committee, he has signaled the Fed does not need to move quickly to ease monetary policy, for a while.

This is because:

• Fed’s policy stance is significantly less restrictive than it had been.

• US economy remains strong, with a “solid” labour market.

As such the central bank does not need to be in a hurry to adjust their policy stance,

Wonder what questions (if any) will be thrown at him come Wed, 12 Feb 2025 when he meets with the House of Representatives.

Thankfully, Tuesday meeting did not cause a “panic” run in US market.

As investors digested cautious commentary from Fed Chair, Jerome Powell on interest rates, concerns remain (a) over the direction of US economy amid U.S. tariffs and (b) the possible escalation of a global trade war.

With the banks and magnificent 7 all reported their earnings, US stocks drifted to a mixed close.

That said, according to FactSet with (earnings) reports in from about 66% of S&P 500 companies, 77% have exceeded profit forecasts. Overall, this is good news.

By the time market closed at 4pm: (see above)

• DJIA: +0.3% (+123.24 to 44,593.65).

• S&P 500: +0.1% (+2.06 to 6,068.50).

• Nasdaq: -0.4% (-70.41 to 19,643.86).

According to SignatureFD, Chief investment officer, Tony Welch - in the near term, the market is grappling with two opposing forces.

• Market is facing the potential challenges of tariffs.

• Corporate fundamentals are marching along pretty well (thankfully).

It is a delicate balancing act that could easily topple when US levied tariffs get a reciprocal reaction from its trading partners.

Tariffs Endangers Whiskey Industry.

American whiskey sales in the US were weak in 2024 due to inflation. However, Trump’s tariffs pose a bigger threat, potentially wiping out overseas sales 100%, according to an industry group.

According to Distilled Spirits Council, CEO, Chris Swonger :

• Trade disputes with Canada & Mexico could raise US spirit prices there, when the reprieve period ends.

• However, the biggest threat is in Europe, where tariffs on American whiskey will double on 01 Apr 2025, due to a steel & aluminum trade conflict.

• For sure, the new tariff would undo the strong rebound in American whiskey sales (in Europe) since the 25% EU tariff was suspended a few years ago.

• Impending 50% tariff would (a) devastate whiskey sales growth and (b) severely damage distilleries - large and small.

• A catastrophic blow, forcing many US whiskey producers, out of their largest export market.

Ironically, anxiety is running high among whiskey producers and their supporters, many of them in states that have voted overwhelmingly to return Mr Trump to the White House.

Looks like it is a boo-boo move now, doesn’t it.

It’s not even a full calendar month since Trump’s inauguration and the level of chaos that is permeating across all government agencies is astounding.

There’s more than one way to skin a cat and the returned president has decided to do it the DOGE way.

The only difference this time round is every country (more or less) should have many contingency plans ready to be whiff out in seconds, in case the tit-for-tat with US worsen.

As investors, I think we need our own “tariffs-proof” strategy as well.

• Consider reducing holdings of US export-dependent stocks due to the risk of further tariffs.

One stock that I am going to monitor for now would be $Netflix(NFLX)$.

Past Month Performance.

Out of the original FAANG stocks, its past month performance came up “tops”, even beating $Meta Platforms, Inc.(META)$. (see above)

• Its past 12 months performance was a +80.71% gain. (see above)

• YTD, it has gained +13.69%.

NFLX - Why ?

Below are some reasons that resonate with me.

(1) Limited Direct Impact:

• NFLX primarily operates in the digital realm, delivering streaming content.

• Unlike companies that rely heavily on physical goods and international supply chains, NFLX's business model is less directly affected by tariffs.

• While tariffs could indirectly impact consumer spending and potentially reduce disposable income for subscriptions, the direct impact is generally less than for companies involved in manufacturing or importing goods.  

(2) Global Diversification:

• Netflix has a strong international presence with subscribers worldwide.

• This global diversification can help mitigate the impact of tariffs imposed by specific countries.

• If one region faces economic challenges due to tariffs, NFLX can still rely on revenue from other markets.  

(3) Content is King:

• NFLX invests heavily in creating original content, which is a key differentiator.

• This focus on unique and appealing content can help retain subscribers even if economic conditions worsen due to tariffs.

• People may cut back on other entertainment expenses but still prioritize access to their favorite streaming shows and movies.  

(4) Potential for Growth:

• Despite its already large subscriber base, NFLX still has room for growth, particularly in international markets.

• As internet access expands and streaming services become more prevalent, NFLX can continue to acquire new subscribers.  

(5) Potential for Forward Stock Split ?

• Did you know that S&P 500 Index stocks with high share prices (above $500), make up 14% of the benchmark index.

• It is common belief that forward stock splits often signal future outperformance.

• NFLX has had no trouble demonstrating its fundamental strength, highlighting its most recent beat-and-raise report.

• NFLX has no trouble demonstrating its fundamental strength and highlight its latest strong quarterly earnings where (a) they did better than expected and (b) raised their future outlook guidance also.

Holding Back Factors.

While above 4 factors seemed compelling, investors will have to realize the following (possible) repercussions as well:

(6) Overall Market Sentiment:

• Even though NFLX might be less directly impacted by tariffs, it's still subject to overall market sentiment.

• If the broader market declines due to tariff-related concerns, NFLX's stock price could also be affected. A -5% dip is easily equivalent to $50.

(7) Competition:

The streaming landscape is increasingly competitive, with new players entering the market. This competition can put pressure on NFLX's subscriber growth and pricing strategies.  

(8) Economic Downturn:

While NFLX might be more resilient than some other companies, a significant economic downturn caused by widespread tariffs could still negatively impact consumer spending and lead to subscriber losses.

Do you know of US stock/s that are tariffs-proof and does not costs an arm and a leg ?

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• Do you think returned US President will raise even more tariffs globally - to earn money and reduce national debt ?

• Do you think NFLX is the only-alpha FAANG stock to buy into now ? (share your view/s in Comments)

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