Two the Point — AI Disruption and Market Resilience

This week’s discussion highlights resilience in the broader economy and markets amidst significant developments in AI and corporate earnings. While recent volatility in tech has raised questions about profitability, the macro backdrop remains supportive, with steady growth and easing inflation offering opportunities for strategic investment.

Key Takeaways:

• Q4 GDP is expected to grow by 3%, an increase from Q3’s 2.7%, highlighting steady economic momentum.
• Inflation pressures continue to ease, with housing costs as a key contributor, supporting the Federal Reserve’s target trajectory.
• Fourth-quarter earnings show 10% growth, though top-line growth remains muted, keeping the focus on cost management for maintaining profit margins.
• The Magnificent Seven tech companies account for 25% of S&P 500 capital expenditures, with Nvidia dropping 17% on Monday amidst DeepSeek AI news, nearly entering bear market territory.
• Despite tech volatility, the S&P 500 fell just 1.5%, and the Dow rose 0.7% on Monday, reflecting broader market resilience.
• European banks and industrials recently hit fresh highs, suggesting diversification opportunities outside the U.S.