Closing Thoughts for the Week

The damage in the tech space seems much more selective than broad-based. The overall current tone seems to be viewing DeepSeek as an annoyance more than a threat. I still think there’s a risk that economic growth could slow quickly here as it has in the past when the bond yield curve normalizes. Treasuries and gold both had another strong week, which indicates that there is a defensive undertone in this market.

The markets may have been anticipating some more aggressive action on the tariff front. As a result, market volatility was relatively tepid and the major averages were able to tack on modest gains. Given that the BoJ both warned on inflation and signaled further potential rate hikes ahead, I think the pressure is going to be on the yen to strengthen as monetary conditions tighten. The buzz around DeepSeek could be the black swan for the markets.

There’s a lot of data still suggesting that re-inflation is happening and the Fed is likely going to be unable to provide much, if any, monetary support in 2025. The Bank of Japan meets again on Friday of this coming week to set policy. If the latest chatter is to be believed, it sounds like that as of right now it’s more likely than not that they’ll hike to 0.5%. If/when that happens, look out.