Weekly Recap: 2/17/25-2/21/25

Macro & Economic Developments

Tariffs: Trump continued to roll out his tariff agenda, most notably targeting autos, semiconductors, and pharmaceuticals this week. Stating that they would be "in the neighborhood of 25%", Trump is adamant on fixing the disparity between US and EU import tariffs on cars, which are currently at 2.5% and 10% respectively. 

Sentiment Falls: Surveys released this week showed executives, homebuilders, and consumers seeing tariffs and policy uncertainty already reflecting in prices and are tainting future outlook. In the February Flash PMI Index, “US manufacturers reported the highest selling price inflation for two years”, and although service sector prices didn’t rise substantially, data shows that this is due to “companies having to discount to attract sales”. Profits, however, are still feeling inflation, which caused the S&P earnings growth indicator to fall to “its lowest since December 2022.” The Homebuilder Housing Market Index fell to 42 from 48 last month, with “uncertainty over the scale and scope of tariffs” hurting an already struggling housing market. The University of Michigan’s Consumer Sentiment Index also dropped below expectations to 64.7, with consumers inflation expectations rising to 4.3% by year-end. 

FED Minutes: Minutes from the FOMC meeting in January revealed that officials remain cautious about further easing due to sticky inflation and “the potential impacts from the new administration”. With a unanimous vote, members kept the FED Funds Rate between 4.25%-4.50%, discussing the effects of “potential changes in trade and immigration policy”, specifically whether they will cause “one-time increases or if they generate more underlying inflation.”

---

Earnings & Corporate Developments

Tech Outlook: Despite the recent DeepSeek drama, AI-related companies continue to offer favorable guidance to investors, with Super Micro (SMCI), Arista Networks (ANET), and Analog Devices (ADI) all beating analyst expectations. SMCI expects “revenues of $40 billion for fiscal year 2026”, which is substantially higher than the analyst consensus. ANET forecasts sales to be between $1.93 billion and $1.97 billion in its first quarter, with the CFO stating that the company is still putting money towards “strategic initiatives" that involve AI. ADI, in addition to seeing its consumer segment revenue jump 19% in Q1, forecast $2.50 billion in Q2 revenue, higher than the $2.46 billion analysts were expecting.  

Adjustments to Tariffs: Both General Motors (GM) and Walmart (WMT) have acknowledged the potential effect of tariffs on their operations. GM stated that “the company would have to consider moving plants” if tariffs are long-term, while Walmart’s adjusted EPS guidance for FY25 is forecasted to be between $2.50 and $2.60. This was below expectations and was followed with a comment from the CFO that “there’s far from certainty in the geopolitical landscape.”

Layoffs: In addition to the numerous federal government layoffs, Southwest and United Healthcare are looking to cut staff. For Southwest, this will be the first “mass layoff in its 53-year history.” The company is looking to “shed 15% of its corporate workforce.” For now, United is offering buyouts to workers in its benefits operations, which, if not satisfactory, will lead to layoffs.  

---

Market Takeaways:

US Equities:

All three indices finished in the red this week, indicating the continued uncertainty among investors about tariffs and their effects on inflation

Large-Cap Value, despite being down for the week, continues to hold a lead over Growth both on a monthly and YTD basis 

XLE and XLU outperformance this week could point to the AI-trade shifting to more component/hardware/derivative investing as opposed to the big-tech names

US Macro/Fixed-Income:

Investors continue to allocate to Treasury’s as inflation speculation heats up in the midst of Trump’s tariffs

The dollar stayed flat for the week, keeping within both a monthly and YTD downtrend 

IG continues to see strength since the start of the year, while HY allocation was roughly unchanged

Global Macro/Equities: 

Japan’s 10-year yield outperformed its peers this week by a substantial margin, while the US 10-year yield saw a significant drawdown on a relative basis

NZD/USD currency rises as USD stays flat for the week  

Both the momentum in China’s tech stocks and India’s economic struggles were reflected in this week’s fund performance 

Commodities:  

The solid trend in gold prices since the start of the year indicate further uncertainty and risk-off mindset developing amongst investors

---

Portfolio Positioning & Tactical Insights

Current Portfolio Bias: Risk-on
Potential Tactical Adjustments:

Increase exposure to Technology selectively due to broad-market bearish sentiment and cheaper multiples; guidance continues to impress

Continue HY allocation due to higher for longer environment, potential economic expansion from on-shoring 

Rotate away from Value, using guidance from tech sector and potential on-shoring as catalysts

Risks to Monitor:

Guidance from retailers and industrial economy→weakness could hurt expansion thesis

Upside surprises on inflation gauges → could affect sentiment, pushing equity prices lower

Geopolitical risks in Ukraine→ further tension could cause tremors through markets, putting further downside pressure on risk-assets

---

Index Performance

Factor Performance

Sector Performance

US Macro Performance

Corporate Bonds

Global Yields

Currency Pairs 

Global Market Performance

Commodities

DISCLAIMER

The information provided in The Tulip Thesis is for general informational and educational purposes only and is not intended as financial, investment, or legal advice. The Tulip Thesis does not provide specific financial advice, investment advice, tax or legal advice. You should consult with a professional financial advisor, tax consultant, or attorney before making any investment or financial decisions.

The opinions expressed by contributors, authors, and editors are their own and do not necessarily reflect the views of The Tulip Thesis or its management. While we strive to provide accurate and up-to-date information, we make no representations or warranties, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained herein for any purpose.

Investing involves risk, including the potential loss of principal. Past performance is not indicative of future results. Readers are solely responsible for any actions they take based on the information in this publication. The Tulip Thesis shall not be liable for any loss or damage arising from the use of this information.

Disclosure: The Tulip Thesis, its owners, contributors, or affiliates may hold or trade securities mentioned in the blog.