Weekend Update #214
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The S&P 500 closed lower on Friday after hitting new record highs earlier in the session, as investors took profits following a strong week. The rally was fueled by optimism surrounding President Donald Trump’s return to the White House, where he was sworn in Monday as the 47th U.S. president. Trump emphasized policies aimed at boosting economic growth and lowering taxes, while signaling a more moderate approach to tariffs on China. However, he suggested the possibility of imposing 25% tariffs on goods from Canada and Mexico as early as February 1. At the World Economic Forum in Davos, Switzerland, Trump called for cuts to U.S. interest rates, oil prices, and taxes, further lifting investor sentiment and supporting stock gains throughout the week.
In addition to general economic policies, President Donald Trump also signed executive orders on cryptocurrency and artificial intelligence, aiming to support these emerging industries. President Trump signed an Executive Order revoking Biden-era AI policies, removing regulatory barriers, and strengthening America’s global AI leadership. The order directs agencies to revise policies that hinder AI innovation, develop an AI Action Plan, and promote a bias-free approach to AI development. Building on previous successes, including doubling AI research funding and issuing the first AI regulatory guidance, this move reinforces Trump’s commitment to advancing U.S. dominance in AI for economic and national security.
Joined by White House AI and crypto czar David Sacks, Trump established a working group to shape digital asset policies, involving key agencies like the Treasury and SEC. Acting SEC Chair Mark Uyeda launched a "crypto task force" to create a clear regulatory framework, signaling a friendlier stance toward cryptocurrency. Additionally, the SEC repealed accounting guidance that had restricted banks from offering crypto custody services by imposing capital reserve requirements tied to crypto-boosted balance sheets. These moves mark a shift toward fostering growth and regulatory clarity in the crypto sector.
In economic news, continuing unemployment claims for the week ending January 11 climbed by 32,000 to 1.899 million, the highest since November 2021 and above the 1.866 million estimate.
Consumer sentiment dropped to 71.1 in January, its first decline in six months, as inflation expectations rose sharply to 3.3% for the one-year outlook and 3.2% for the long-term. Perceptions of tariffs drove a significant divide in inflation forecasts, with those viewing tariffs as risky expecting 4.5% inflation, while those seeing tariffs as beneficial forecast -0.1%. Despite strong retail sales fueled by buy-in-advance behavior, measures of current conditions and future expectations weakened, and only 42.3% of households expect income growth next year, with median expected growth stuck at a low 0.7%.
Friday’s Close (Weekly Performance)
S&P 500 6,101.24 (+1.74%)
Nasdaq 19,954.30 (+1.65%)
Dow Jones 44,424.25 (+2.15%)
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