Home › Market News › AI Investments, Volatility Futures, and Crypto & Blockchain Updates
The Economic Calendar:
MONDAY: Building Permits (7:00a CT), Chicago Fed National Activity Index (7:30a CT), New Home Sales (9:00a CT), Dallas Fed Manufacturing Index (9:30a CT), 2-Year Note Auction (10:30a CT), 5-Year Note Auction (12:00p CT)
TUESDAY: Durable Goods (7:30a CT), Redbook (7:55a CT), House Price Index (8:00a CT), Consumer Confidence (9:00a CT), Richmond Fed Manufacturing Index (9:00a CT), Dallas Fed Services Index (9:30a CT), 7-Year Note Auction (12:00p CT), Money Supply (12:00p CT)
WEDNESDAY: MBA Mortgage Applications(6:00a CT), Goods Trade Balance (7:30a CT), Retail Inventories (7:30a CT), Wholesale Inventories (7:30a CT), EIA Petroleum Status Report (9:30a CT), FOMC Announcement (1:00p CT), Fed Chairman Press Conference (1:30p CT)
THURSDAY: Jobless Claims (7:30a CT), U.S GDP (7:30a CT), Real Consumer Spending (7:30a CT), Pending Home Sales (9:00a CT), EIA Natural Gas Report (9:30a CT), Fed Balance Sheet (3:30p CT)
FRIDAY: Core PCE (7:30a CT), Fed Bowman Speech (7:30a CT), Employment Cost Index (7:30a CT), Chicago PMI (8:45a CT), Baker Hughes Rig Count (12:00p CT)
Key Events:
Positive developments have contributed to a significant rally in the stock market, with the S&P 500 and other major indices looking toward new highs.
The stock market experienced an intense week, with major indices posting gains driven by positive earnings reports and encouraging economic data.
Looking ahead, the focus now turns to monetary policy, with the Federal Reserve’s first interest rate decision of the year scheduled for this Wednesday.
We are also closely watching the tape for news on tariffs from President Trump. He refrained from immediately announcing tariffs after his inauguration, though he said Canada and Mexico could be targeted as soon as February.
Markets seem untouchable at the moment, but VIX seasonality is strong from here. Nobody we speak to talks about hedges these days, which is usually a good time to start leaning into some cheap put protection.
The upcoming Federal Open Market Committee (FOMC) decision, scheduled for this Wednesday, is drawing significant attention due to recent economic indicators and political developments.
Jawboning has begun by President Trump to try to influence the interest rate level. Last Thursday, he said he wanted the Federal Reserve to cut interest rates when the central bank hit pause for an uncertain duration. He argued that he understood monetary policy better than those charged with setting it.
At a White House event following those comments, Trump said, “I think I know interest rates much better than they do, and I think I know it certainly much better than the one who’s primarily in charge of making that decision” in an apparent reference to Federal Reserve Chairman Jerome Powell, who Trump appointed as Fed leader in his first stint as president.
The market is reacting to Trump’s policies to make “U.S. oil and gas great again.” This includes expectations of increased domestic production, which might lower prices if supply significantly outpaces demand.
However, the immediate market response included a sell-off, likely due to the uncertainty and short-term implications of policy shifts, including potential tariff threats.
Trump has postponed the imposition of tariffs on Canadian oil until at least February 2nd, giving Canada and Mexico a few days to negotiate. This delay has reduced some of the oil tariff premiums in the short term, although the long-term intention is to lower energy costs. However, any tariffs on Canadian oil could paradoxically increase costs in the short term due to the U.S.’s reliance on this import for refining.
The AI Boom is not over…
President Donald Trump announced a significant AI infrastructure project, Stargate, involving a coalition of tech giants, including SoftBank, OpenAI, and Oracle. The initiative promises an initial investment of $100 billion and a total commitment of up to $500 billion over four years. It aims to build AI data centers in the U.S., starting with Texas, to create 100,000 jobs “almost immediately.”
The announcement was made during a press conference alongside key figures like Sam Altman of OpenAI, Larry Ellison of Oracle, and Masayoshi Son of SoftBank. The announcement highlighted its scale as “the largest AI infrastructure project in history.”
Elon Musk and many on social media criticized the project’s effort. Elon Musk has openly criticized the Stargate project, particularly questioning the financial backing behind the commitments. On his social media platform, X, he stated that the companies involved “don’t actually have the money,” specifically calling out SoftBank for only having “well under $10B secured” for the initiative.
This skepticism directly challenges the credibility of the project’s funding and the announcements made by Trump and the involved companies. Musk also has a riff with Sam Altman and OpenAI.
The BOJ hiked. JPY futures barely noticed.
The Bank of Japan (BOJ) recently made a significant policy shift by raising its key policy rate to its highest level in 17 years. This move marks a departure from the era of unconventional monetary policy that has characterized the Japanese economy for many years.
For decades, Japan has grappled with weak prices and economic stagnation. While inflation has increased globally in recent years, the BOJ largely attributed domestic price pressures to imported inflation. However, with robust wage growth and signs of a more sustainable economic recovery, the central bank has gained confidence in achieving its 2% inflation target.
The BOJ has signaled its intention to continue raising interest rates gradually towards a neutral level, which neither stimulates nor cools the economy. This gradual tightening of monetary policy ensures stable and sustainable economic growth.
We are watching a significant inflection point in crypto and blockchain.
Recent actions paint a picture of Bitcoin transitioning from a potential threat to a recognized asset class with governmental support, addressing past concerns about regulation, privacy, and the sustainability of cryptocurrencies in the U.S. financial system.
Bitcoin hit a new all-time high last week of $109,000. The fact this new record occurred on the same day that President Trump was sworn into office, while Wall Street’s market was closed, is about as poetic as it gets.
President Trump signed an executive order to establish a favorable regulatory environment for cryptocurrencies. This is described as the most comprehensive plan to date for the industry.
The order establishes the “Presidential Working Group on Digital Asset Markets,” led by David Sacks (White House AI & Crypto Czar), with key figures from the Treasury and SEC. The group’s mandate includes:
Looking ahead, the Ross Ulbricht pardon, Wyoming Senator Cynthia Lumis’s involvement, SEC Commissioner Gensler’s exit, the acceleration of the blockchain peleton, and the high probability of a Bitcoin reserve are all huge game changers and a key inflection point.
Since the inauguration, U.S. Dollar futures have experienced a significant downturn.
The Dollar is on track for its worst weekly performance since November 2023, indicating a capitulation in the foreign exchange market following the initial expectations set by the inauguration day announcements.
The DXY (U.S. Dollar Index) had been trending towards highs last seen in 2022 before the inauguration, but it has since retreated from those levels. Anecdotal evidence suggests that around two-thirds of long USD positions might have been unwound, reflecting a shift in market sentiment. Despite this, there is an expectation that the USD will stabilize and hold its ground soon.
We still expect USD to hold in. Although President Trump’s softer tone on tariffs has helped to halt the DXY rally, we still believe it is too early to push tariff risks aside, as proper foreign trade negotiations have yet to commence.
The announcement and implementation of tariffs can have complex effects on the U.S. dollar, and the immediate reaction expected is “Strengthening of the Dollar.”