February 3, 2025 Newsletter

Dear Friends,

Tangents: Happy Monday.

February 3, 1928: The New York Daily News publishes the first color photograph in a newspaper, marking a milestone in print journalism.
February 3, 1971: Apollo 14 astronauts Alan B. Shepard Jr. and Edgar D. Mitchell landed on the lunar surface during the third successful manned mission to the moon. Go to article.

Gertrude Stein, writer, b.1874.
Simone Weil, mystic, b. 1909.

Today in history: Amelia Earhart, the world-famous aviator, visits Seattle in 1933 and speaks at the Civic Auditorium. It is less than nine months since Earhart’s flight on May 20, 1932, made her the first woman — and second person — to fly solo across the Atlantic Ocean. During an earlier visit, Earhart visits with fellow aviation pioneer William Boeing and inspects the Boeing Aircraft Factory. Earhart disappears July 3, 1937, over the Pacific Ocean as she attempts to circumnavigate the earth at the equator. (Compiled from HistoryLink.org)

Bayeux Tapestry: A 1,000-year-old embroidery depicting William the Conqueror’s victory and King Harold’s grisly death
A long roll of cloth embroidered with key scenes from British history is a unique medieval chronicle. Read More.

Grammy’s red carpet fashion
Some of the celebrities’ looks were just as striking as the performances. See the best fashion moments from the Grammy’s red carpet.

How Alexander the Great redrew the map of the world
He conquered land across three continents and never lost a battle before dying at just 32 years old. Read about Alexander the Great’s legacy and how he redrew the map of the world

Was Alexander the Great eaten by sharks? Inside the wild theories for what happened to the iconic ruler’s body.
Alexander the Great is one of the most famous rulers of the ancient world. As king of Macedonia from 336 B.C. to 323 B.C., he conquered an enormous empire, stretching from the Balkans to modern-day Pakistan. But his reign was brought to an abrupt halt when he died at the age of 32. His cause of death is highly disputed, and his tomb has been lost for centuries.
Hundreds have searched for the tomb, to no avail, and theories of its location range from his homeland of Macedonia (now Greece) to Egypt. But researchers say they are closer than ever before to finding this renowned resting place. Read More

Earth’s crust is peeling away under California
A section of the upper mantle and crust under the Sierra Nevada mountains is peeling away, in a process that may mimic how the continents were formed. Read More.

Why is DeepSeek such a game-changer? Scientists explain how the AI models work and why they were so cheap to build.
DeepSeek’s V3 and R1 models took the world by storm this week. Here’s why they’re such a big deal. Read More.

New fabric can heat up almost 50 degrees to keep people warm in ultracold weather
A new smart fabric converts light into heat and can raise temperatures by more than 54 degrees Fahrenheit (30 degrees Celsius) after just 10 minutes in the sun.

PHOTOS OF THE DAY

Xiangyang, China
Artists perform a dragon dance to celebrate the lunar new year in Hubei province, central China
Photograph: VCG/Getty Images
A musher competes with his dogs during the Sedivackuv Long 2025 sled dog race near the Czech-Polish border in the Orlicke mountains
CREDIT: THE GUARDIAN. COM/FEB 03, 2025
Santorini, Greece
Landslides caused by earthquake tremors throw up clouds of dust along a stretch of the island’s rocky cliff face. The latest tremors prompted some people to sleep outdoors and others to leave the island by plane or ferry. More than 200 minor earthquakes were recorded at sea or on surrounding islands, with the strongest – of magnitude 4.6 – striking the waters between Santorini and Amorgos on Sunday afternoon
Photograph: Aris Messinis/AFP/Getty Images
Market Closes for February 3, 2025

International Markets

Bonds

Currencies

Commodities

MARKET COMMENTARY:

Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite fell for the second day, dropping 1.1%, or 291.34 to 25,241.76 in Toronto. The move was the biggest since falling 1.2% on Jan. 10.
Today, financials stocks led the market lower, as 9 of 11 sectors lost; 143 of 222 shares fell, while 74 rose.
Canadian Pacific Kansas City Ltd. contributed the most to the index decline, decreasing 5.7%. Goeasy Ltd. had the largest drop, falling 8.3%.
Insights
* In the past year, the index had a similar or greater loss 10 times. The next day, it declined six times for an average 0.8% and advanced four times for an average 0.7%
* The index advanced 20% in the past 52 weeks. The MSCI AC Americas Index gained 20% in the same period
* The S&P/TSX Composite is 2.4% below its 52-week high on Jan.30, 2025 and 23.3% above its low on Feb. 13, 2024
* The S&P/TSX Composite is little changed in the past 5 days and rose 0.7% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 20.9 on a trailing basis and 17.5 times estimated earnings of its members for the coming year
* The index’s dividend yield is 2.8% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$4.02t
* 30-day price volatility rose to 10.71% compared with 10.22% in the previous session and the average of 11.11% over the past month
================================================================
| Index Points | |Sector Name | Move | % Change | Adv/Dec
================================================================
Financials | -150.2854| -1.8| 6/20
Industrials | -81.8661| -2.5| 5/23
Energy | -27.7155| -0.7| 12/28
Information Technology| -19.3302| -0.7| 5/5
Consumer Staples | -13.0182| -1.4| 1/9
Consumer Discretionary| -11.0700| -1.4| 2/9
Real Estate | -7.0815| -1.5| 3/16
Utilities | -6.2991| -0.7| 5/10
Health Care | -0.9633| -1.3| 1/3
Communication Services| 2.7282| 0.5| 3/2
Materials | 23.5457| 0.8| 31/18

================================================================
| | |Volume VS| YTD |Index Points| | 20D AVG | Change Top Contributors | Move |% Change | (%) | (%)
================================================================
Canadian Pacific Kansas | -43.1500| -5.7| 197.1| 4.6
RBC | -40.5400| -2.3| 25.7| -0.1
Canadian National | -30.9300| -5.3| 143.5| -1.5
Constellation Software | 9.2460| 1.4| 21.7| 8.4
Waste Connections | 10.2500| 2.1| 95.3| 10.6
Agnico Eagle Mines | | | |
Ltd | 10.8500| 2.3| 89.7| 22.9
US
By Rita Nazareth
(Bloomberg) — Wall Street traders trying to catch up on every new headline around President Donald Trump’s tariff negotiations were faced with a renewed bout of volatility across asset classes.
The S&P 500 trimmed most of a slide that earlier approached 2%. That was after Trump agreed to delay 25% tariffs against Mexico for one month, following a conversation with his counterpart Claudia Sheinbaum. The talks spurred a quick turnaround in currencies, with the peso going from worst to best performer among its major counterparts in a matter of minutes.
The dollar almost wiped out a rally that was earlier shaping out to be the best since the onset of the pandemic. Canada’s loonie pared losses.
“This is a very fluid and evolving situation,” said Victoria Greene at G Squared Private Wealth. “For now, our baseline thesis is the bulk of these are transitory and likely more watered down with concessions. We are on top of developments and watching how this may affect earnings, the US dollar and inflation.”
The delay with Mexico bolsters the view that Trump sees tariffs as a negotiating ploy — but is still reluctant to inflict economic pain on Americans. His move to invoke an emergency and impose tariffs on Canada, Mexico and China is the most extensive act of protectionism taken by a US president in almost a century.
Among the biggest uncertainties is how a resilient US economy would handle the impact of a trade war, in case it materializes. That concern was evident in the bond market, where short-dated Treasury yields climbed as longer ones moved in the opposite direction.
“While we believe that tariffs are primarily a negotiating tool for President Trump, it’s very difficult to say whether these tariffs will be short-lived or if there is a scenario where a deal is struck that reduces the tariffs,” said Yung-Yu Ma at BMO Wealth Management.
The S&P 500 fell 0.8%. While carmakers, chip and industrial shares all bounced from session lows, they continued to lead losses. Defensive groups gained, underscoring the market’s bid for safety. The Nasdaq 100 slid 0.8%. The Dow Jones Industrial Average lost 0.3%. A gauge of the “Magnificent Seven” mega caps sank 1.7%. The Russell 2000 slipped 1.3%. A UBS Group AG basket of stocks at risk from the proposed tariffs sank 3.1%. Wall Street’s favorite volatility gauge — the VIX — topped 18.
The yield on 10-year Treasuries was little changed at 4.53%. The Bloomberg Dollar Spot Index rose 0.1%. The Mexican peso climbed 1.3%. The Canadian dollar fell 0.2%.
To David Lefkowitz at UBS Global Wealth Management, while tariff announcements could generate volatility, “in our base case we don’t think the Trump administration will take actions that materially dent the outlook for economic or corporate profit growth.”
“At this point, we are doubtful that the tariffs on Canada and Mexico will be long lasting, if enacted at all,” said Keith Lerner and Michael Skordeles at Truist Advisory Services.
“Nevertheless, until there is clarity on the duration or magnitude of tariffs, these actions inject uncertainty into supply chains and pricing for many companies – large and small – across North America.”
At J.P. Morgan Asset Management, David Kelly says investors have every reason to be concerned about a trade war, which has the potential to impart a stagflationary impulse to the investment environment, boosting inflation and interest rates while dragging on growth and profits.
“If this scenario unfolds, U.S. equities with the highest valuations are likely the most vulnerable while non-US assets and real assets could provide ballast to portfolios,” Kelly said. “Most of all, investors should ensure that they are well diversified and balanced as we head into much stronger and uncertain trade winds.”
“Trade acquiescence is what the US economy needs to skirt turbulence and widen the path toward non-inflationary growth,” said Jose Torres at Interactive Brokers. “A ramp-up in trade rhetoric and disagreements concerning global commerce will weigh on revenues, costs and margins, challenging corporate America’s ability to grow earnings.”
There’s a risk of a 5% slump in US stocks over the coming months as the latest round of tariffs by the Trump administration crimp earnings forecasts, according to Goldman Sachs Group Inc. strategists.
“These announcements have come as a shock to many investors who expected tariffs would only be imposed if trade negotiations failed,” Goldman strategist David Kostin wrote in a note. “Our economists describe the outlook as unclear but believe there is a substantial probability that the tariffs on Canada and Mexico will be temporary.”
Kostin said that if sustained, the latest tariffs would reduce his S&P 500 earnings forecasts by about 2% to 3%, not accounting for the impact from further tightening in financial conditions or changes in consumer and corporate behavior. He also warned the S&P 500’s fair value could slump about 5% over the near term due to the hit to both earnings and equity valuations.
The onset of tariffs on Mexico, Canada and China raises the risk that the S&P 500 will experience at least one 5%-10% drawdown this year, RBC Capital Markets strategists led by Lori Calvasina said.
The team is on guard for a pullback early in the year, given positioning, valuations and that the index price remains high, noting note that optimism that tariffs were just a negotiating tactic contributed to the complacency.
Morgan Stanley strategist Michael Wilson said equity markets had so far been sanguine about the possibility of sustained levies, but that view “is likely to be tested the longer these tariffs stay on.” Hedge funds dumped US equities for a fifth straight week, according to data from Goldman Sachs Group Inc.’s prime brokerage, as the AI threat from China’s DeepSeek and Trump’s promise to impose steep levies on America’s biggest trading partners rippled through markets. The funds ramped up short sales in single stocks and long sales in macro products, the data show.
Retail investors, however, seem to have wagered the president wouldn’t risk the economic and market impact that many predict tariffs will bring. That group poured $2.1 billion into US stocks on Friday, according to an analysis by Emma Wu, JPMorgan Chase & Co.’s global quantitative and derivatives strategist. An inflow of more than $2 billion has occurred just nine times in the past three years, with five of those instances already occurring in 2025.

Wall Street on Tariffs:

* Neil Dutta at Renaissance Macro Research: Tariffs represent a negative supply shock. That is, growth weakens while inflation firms up. I don’t think the Fed is hiking into a negative supply shock. Yes, the Fed is worried about inflation expectations, but they also don’t welcome additional labor market cooling. We already know wage growth is slowing. The growth effects will dominate inflation considerations. I would be buying bonds here.
* Emily Roland and Matt Miskin at John Hancock Investment Management:

The impact of the tariffs to us comes back to the US dollar. If the dollar can strengthen it helps the US buy foreign goods cheaper and that can mitigate some of the tariff cost. The dollar can also be a currency that benefits from a risk-off environment while the euro for example tends be more risk-on. A way to potentially hedge tariff risks is by leaning into US dollar exposure.
* Keith Lerner and Michael Skordeles at Truist Advisory Services:

From a stock market perspective, our “Bull in a China shop” outlook title remains fitting. The primary market uptrend remains intact, but the latest tariff developments underscore the potential for disruptions and broken pieces that we expected to be part of the investment narrative in 2025.
* Yung-Yu Ma, chief investment officer, BMO Wealth Management:

We wouldn’t be too eager to put the bulk of cash on the sidelines to work all at once. The reality of the economic disruption from the tariffs will quickly become apparent, and this is only Round 1 of a Trade War, so being ready for opportunities over the course of a few months is more advisable.
Be patient and opportunistic; there may be a time to be aggressive, but it is not upon us yet.

Corporate Highlights

* Nippon Steel Corp. and United States Steel Corp. claimed former President Joe Biden unfairly prejudged their $14.1 billion merger and gave the companies no chance for feedback on a “sham” national security review before he blocked the deal.
* Tyson Foods Inc.’s quarterly earnings beat even the highest of analyst estimates as stronger chicken profits helped offset losses in its beef business, prompting the company to raise its 2025 profit estimate.
* MicroStrategy Inc. said it didn’t buy any Bitcoin in the prior week, halting a string of 12 consecutive weekly purchases that began in late October.

Key events this week:

* US factory orders, US durable goods, Tuesday
* Alphabet earnings, Tuesday
* Fed’s Raphael Bostic, Mary Daly, Philip Jefferson speak, Tuesday
* China Caixin services PMI, Wednesday
* Eurozone HCOB Services PMI, PPI, Wednesday
* US trade, Wednesday
* Fed’s Austan Goolsbee, Tom Barkin, Michelle Bowman, Philip Jefferson speak, Wednesday
* Eurozone retail sales, Thursday
* UK rate decision, Thursday
* US initial jobless claims, Thursday
* Fed’s Christopher Waller, Lorie Logan speak, Thursday
* Amazon earnings, Thursday
* US nonfarm payrolls, unemployment, University of Michigan consumer sentiment, Friday
* Fed’s Michelle Bowman, Adriana Kugler speak, Friday

Some of the main moves in markets:
Stocks
* The S&P 500 fell 0.8% as of 4 p.m. New York time
* The Nasdaq 100 fell 0.8%
* The Dow Jones Industrial Average fell 0.3%
* The MSCI World Index fell 1.1%
* Bloomberg Magnificent 7 Total Return Index fell 1.7%
* The Russell 2000 Index fell 1.3%
Currencies
* The Bloomberg Dollar Spot Index rose 0.1%
* The euro fell 0.6% to $1.0296
* The British pound was little changed at $1.2403
* The Japanese yen rose 0.3% to 154.70 per dollar
* The Mexican peso rose 1.3% to 20.4139
* The Canadian dollar fell 0.2% to 1.4569
Cryptocurrencies
* Bitcoin rose 4.3% to $101,213.53
* Ether fell 6.8% to $2,708.08
Bonds
* The yield on 10-year Treasuries was little changed at 4.53%
* Germany’s 10-year yield declined seven basis points to 2.39%
* Britain’s 10-year yield declined five basis points to 4.49%
Commodities
* West Texas Intermediate crude rose 0.5% to $72.89 a barrel
* Spot gold rose 0.7% to $2,817.29 an ounce

This story was produced with the assistance of Bloomberg Automation.
–With assistance from Phil Kuntz, Robert Brand, Catherine Bosley and Matthew Burgess.
Have a lovely evening everyone.

Be magnificent!
As ever,

Carolann
The pessimist sees difficulty in every opportunity.  The optimist sees opportunity in every difficulty. –Winston Churchill, 1874-1965.

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM
Senior Investment Advisor

Queensbury Securities Inc.,
St. Andrew’s Square,
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7

Tel: 778.430.5808
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www.carolannsteinhoff.com