This week was full of bombshell announcements which spiked volatility and had investors rethinking many core assumptions. If you haven’t been paying attention here are a few of the major news items that rattled markets:
- Monday morning the world woke up to a renewed focus on the global AI war with the advent of DeepSeek. This Chinese AI tool became the most downloaded app on the Apple App Store. The company which developed it said it was created in a fraction of the time as other US competitors and for just $6mm vs the billions spent on alternative AI models.
- On Wednesday, the Federal Reserve announced that they would pause interest rate reductions over fears of renewed inflation and strong economic growth. Just four months ago, the markets were pricing in six rate reductions for 2025. Now, markets are only expecting two interest rate cuts this year.
- Today, the White House announced that beginning on Saturday, the US will impose 25% tariffs on Canada and Mexico and 10% tariffs on China. While the details of these tariffs are not yet known, markets were caught off guard.
If you had told me last Friday that all of these announcements would happen this week, I would have guessed that stock markets would be down at least 5% in response. Amazingly, as I write this note the MSCI World Stock Index is down just 0.65% for the week with the S&P 500 down just 0.9% over the same period.
So what is holding up stock markets through such a challenging series of events?
Earnings.
So far, 81% of companies have beaten earnings per share estimates for Q4 2024. Apple, Microsoft and Meta all posted EPS above forecast with Meta in particular delivering earnings nearly 19% higher than expected.
Last week, the major US banks also delivered strong earnings and this week companies like Visa and Mastercard beat expectations as well.
So as long as companies keep delivering strong earnings growth, stock market investors will look past the various uncertainties in the world.
