Capital Market Follower Daily Blog Post



Market Sentiment and AI

Despite record-high stock indexes, market sentiment has turned bearish. This could be a bullish signal from a contrarian perspective, especially with better-than-expected Q4 2024 earnings results and positive news on AI capital spending. The Citibank Economic Surprise Index is back in positive territory, and key economic indicators are showing strength.

However, AI also presents challenges. OpenAI's ChatGPT Pro highlights the high costs associated with AI computing resources. For AI to justify significant investments and replace human workers, it needs to become more cost-effective. Chipmaker Nvidia is working on advanced AI processors to address this issue.

Trump Administration and Economic Policies

The stock market reacted positively to President Trump's delay in raising tariffs. However, his proposed tariff policies and other economic decisions could impact inflation and market stability. The 10-year Treasury yield is being closely watched as a barometer of the Trump administration's economic policies. If it rises significantly above 5%, it could signal trouble for the economy.

Other Market Drivers
  • Foreign investment: Foreign investors continue to buy US bonds and stocks, which could support a market rebound.
  • M&A activity: Jefferies Financial Group's strong Q4 2024 results suggest an improvement in the Wall Street deal-making environment.
  • Oil and Energy: Disappointing earnings previews from oil producers and potential deals in the electricity generation sector are shaping the energy landscape.
  • Climate Risk and Insurance: Climate risk is becoming a factor in real estate, with Zillow and other platforms adding climate risk scores to property listings.
  • Chip Export Curbs: Nvidia could face tighter restrictions on AI chip exports to China, which could impact its stock performance.
Disclaimer: This blog post is based on news articles and does not constitute financial advice.

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