Monthly Market Recap: Hold My Beer; The World Just Flipped (Again)>
Some asked if a monthly commentary could stay interesting. My answer? At this rate, I could write a daily letter and still be redrafting it as the next shockwave hits. Trump, Musk, AI (artificial intelligence), and global chaos have ensured that the world never stops moving.
DeepSeek: China’s AI “Sputnik Moment” Just Happened
The media called DeepSeek-V2 China’s “Sputnik Moment” for AI. Dramatic? Maybe. Accurate? Absolutely.
While Western AI labs spend billions on energy-hungry supercomputers, China’s DeepSeek-V2 just developed a GPT-4-level model that’s leaner, faster, and fully open-source—all while running on Nvidia chips that China supposedly couldn’t get.
This isn’t just about catching up—it’s about rewriting the AI arms race. The real shock? Efficiency is the new nuclear weapon. If China can push AI further with fewer resources, U.S. tech dominance isn’t as secure as it seems.
Inflation: Still Here, Still a Problem
Inflation isn’t going anywhere. We’re in an extended period of above-target inflation—think years, not months.
The January CPI came in hot: +0.5% vs. the expected +0.3 %. That’s direct confirmation that inflation is still burning. The Fed cut rates by 100 bps in late 2024, and now prices are rising again— a surprise.
Consumer-Price Index, Change from a Year Earlier
Source: Labor Department as of January 2025.
Now, the independence of the Fed is in focus because Trump wants lower rates.
“I’ll demand that interest rates drop immediately.” — Trump, January 2025
Powell is focused on fighting inflation and will hold his ground—for now. But his term ends in May 2026, and that’s when things get interesting.
This isn’t new. Politicians forcing central banks into bad decisions never ends well:
- Nixon pressured the Fed in 1972 → won reelection → runaway inflation.
- Erdoğan strong-armed Turkey’s central bank → lira collapsed; inflation exploded.
- Argentina printed money to fund spending → hyperinflation, default, disaster.
When politicians mess with central banks, markets pay the price.
Gold is Laughing at Everyone
One asset class hedge against inflation, government overspending, and currency devaluation. Yet, few investors own it.
It’s gold.
In the past 12 months alone, gold has nearly doubled the S&P's returns.
Gold has outperformed the S&P 500 over the past 1, 2, and 3 years
Source: State Street Global Advisors and Bloomberg as of 2/12/2025. This chart is for illustrative purposes only. Past performance is no guarantee of future results. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.
At $2,900/oz, people are asking when gold will break $3,000. My reaction? Who cares. Talk to me when it hits $5,000.
2025 Investment Themes: Nothing Changes, Everything Changes
So, what does all this mean for investors?
- AI is more powerful and accessible than ever.
- Inflation isn’t going away—government spending ensures that.
- Energy demand will keep rising, no matter how efficient AI gets.
The playbook stays the same—own equities, real assets, and digital assets. The world is changing fast, but the right investments don’t.
Asset Class Breakdown
Equities
- Nvidia suffered its worst single-day loss ever. China’s DeepSeek trained a top-tier model for $5.58M using just 2,000 Nvidia GPUs, a fraction of what U.S. firms spend.
- Investors panicked. Nvidia dropped 17%, wiping out $589B in market value.
- That said, Big Tech (Amazon, Google, Microsoft) is still investing billions in AI, so Nvidia’s long-term story isn’t over yet.
Fixed Income
- Rates are rising again. The 10-year Treasury yield hit 4.8%, dropped to 4.5%, and is now climbing back up after the latest CPI report.
- Credit markets remain calm—BBB corporate spreads over Treasuries are at just 1.08%.
Real Assets
- Real assets are winning in 2025 because:
- Governments won’t stop spending
- The world won’t stop breaking (geopolitical risk)
- AI won’t stop devouring resources
- As of February 12:
- Gold is up +10.65%
- Bloomberg Commodity Index is up +7.38%
- Global Natural Resources stocks are outperforming
Digital Assets
- Bitcoin is range-bound at ~$100K. Fed policy and regulation limit upside, while government spending and institutional adoption provide a strong floor.
- BTC is maturing into a macro asset—less wild speculation, more tied to liquidity cycles and real adoption.
Final Thought: Own the Future
The world is changing fast, but the playbook stays the same. AI is here, inflation is sticky, energy demand is rising, and governments won’t stop spending.
The right moves? Stay long growth equities, real assets, and digital assets.
Bet on the future—or get left behind.
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