Weekly Brief #62
Prepare for market turbulence... Plus, J&J acquires Intra-Cellular Therapies, Amazon invests $5 billion in Mexico, U.S. TikTok ban almost complete, Nintendo announces Switch 2, Israel-Hamas ceasefire.
Good morning investors 👋,
Welcome back to the 62nd Weekly Brief.
This week’s performance:
S&P 500: +0.80% | Nasdaq: +0.13% | Dow Jones: +1.44% | TSX: -0.63% | Gold: +0.98% | Bitcoin: +6.76% | The Quality Fund: +1.80%.
With just days until Donald Trump takes office and a week before big tech earnings hit Wall Street, the markets have continued to stagnate. It’s been a rough start to 2025, but as I keep reiterating, we’re still less than one month into the year. So the question arises: as 2025 starts off sluggish, how can we as investors prepare for when the markets adjust to this new year?
PS: I’ve decided to add a catchy name to my stock portfolio that reflects the values and insights I share. Much like Joseph Carlson’s approach, I’ve named my portfolio “The J. Nicholas Quality Fund)” (simply, “The Quality Fund”), where readers and followers can see and track my trades and performance. All major updates related to The Quality Fund will be posted exclusively on my Blossom account, but I’ll also be sharing the weekly performance here in Weekly Brief and my trades via The J. Nicholas Substack chat. This week’s Stock Analysis issue will be sent out tonight.
Let’s get into it. (12 min read)
In this issue:
📈 What investors should monitor for 2025
🧑⚖️ U.S. TikTok ban, almost complete
🪖 Israel-Hamas ceasefire, reached
FEATURED STORY
📈 What investors should monitor for 2025
I wrote before the U.S. election about the impact a Donald Trump presidency would have on the stock market. Now, with less than three days until Trump’s inauguration, much more has changed, adding pressure and uncertainty to what the market holds for 2025—beyond just American economic policies. Today, I want to share a few crucial areas for investors to monitor over the next month—and why—as the market adjusts to a brand-new year.
#1: Trump’s economic policies:
Up first is U.S. President-elect Donald Trump and his pro-stock market policies (as he gets into office this Monday). Trump is a very unpredictable decision-maker, which makes him a very important figure for your portfolios. As we’ve talked about before, Trump’s focus, with the help of Elon Musk, will be to bolster business growth and deregulation across sectors—lowering taxes, cutting departments of regulation, pouring billions of taxpayer dollars into investment in technology such as data centres, and so much more. America is the obvious leader in AI and technological innovation globally, and it’s not even close. This, of course, is a major win for investors, and will push stock growth in 2025.
The year 2025 will be the year of business adoption of AI, which means a lot of cost cuts, possibly layoffs as companies automate more jobs, but also a rise in interest for those supplying this AI in-part (Amazon, Salesforce, Nvidia, Google, OpenAI, etc.). And of course, fewer tax burdens for these businesses according to Trump’s expected tax policies.
We even have news for crypto because of Trump. With new leadership over the SEC, Trump and his administration are likely to deregulate and overhaul the U.S. cryptocurrency sphere drastically. Similar to the polices expected to benfit the stock market. In fact, this deregulation from the SEC is what leads us to the next crucial area to monitor over the coming months.
#2: Mergers & acquisitions
The SEC under the Biden administration was very tough on American tech businesses and extremely critical of mergers and acquisitions (M&As). When the new Trump administration comes in to the SEC, they will be swarmed by ongoing lawsuits and litigation with companies like Meta, Google, Microsoft and Activision Blizzard, Amazon, and Apple over monopoly and privacy concerns. I not only expect this “new SEC” to drop these lawsuits, but I expect them to allow for a much more easy-going business culture.
Because of the theme of deregulation and pro-business American policies Trump has been advocating for, I, like many, expect M&As to become much more apparent in 2025. Companies are flush with cash, looking for more growth, and in a low-tax, pro-innovation, pro-deregulation economic environment, those same companies will be looking to capitalize on the opportunity. Definitely watch out for major corporate moves in 2025.
#3: Big tech earnings
Of course, this wouldn’t be a “what to watch for” list if I didn’t mention big tech or the Magnificent 7: Apple, Microsoft, Amazon, Google, Meta, Nvidia, and Tesla—a small group of companies now accounting for nearly a third of the U.S. stock market, worth over $17.4 trillion. These companies are incredibly profitable technology businesses, ranging from social media and business software to AI chips, electric and self-driving cars, and cloud computing.
Highly profitable, low-capex, consistently growing monopolistic businesses. The best aspects of a stock investment, squashed together.
These few companies have been the leaders of the stock market for the past two years in terms of returns, and with 2025, this is looking to continue. In less than a month, all of the companies above will have posted their Q4 2024 results, and we will see if their bullish momentum continues into 2025.
#4: Inflation, interest rates & treasuries
Macroeconomics isn’t the most entertaining topic, but it’s more important than ever going into 2025. Although the U.S. economy is in its best shape, the market is still—and always will be—sensitive to macroeconomic announcements. For instance, around a week ago, the U.S. posted an outstanding job report. But you may have noticed the market dipped. This is because when the economy looks A-OK and inflation is down like it currently is, there are fewer chances of further interest rate cuts. When the Federal Reserve cuts rates, bond yields normally fall, which makes stocks more attractive. The opposite is true for when rates aren’t as frequent (yields stay higher making stocks less attractive).
I will be writing a Deep Dive issue very soon covering what to look for and how to understand why the market reacts to this subject, but simply put: watch very closely for these changes and announcements from the financial bodies of the U.S. government. Fred is your best friend.
#5: International conflict & political instability
Last but not least, we have global conflicts and political instability. Among the obvious reasons like global unrest, international conflict and tension are some of the most important factors to consider for the sentiment of the stock market as we enter a 2025 stock market. Whether it be Chinese tensions over Taiwan, the Russia-Ukraine war, or even the war in Gaza (which has just recently had a ceasefire agreement reached—more below), conflicts tear apart market sentiment.
Our world is very close-knit economically. All countries play a role in one aspect or another. Therefore, any major conflict at any place around the world, matters undeniably to every and any investor.
Stay tuned
Looking closely at these specific areas and topics this year will be a major help for you to determine how the markets are moving in 2025. This year, like last year, is going to be filled with AI, innovation, and hype. Meaning, we’ll most likely be looking at very generous returns as this craze continues. However, be cautious. Don’t be too optimistic, and stay attentive. Stay rationally invested in high-quality businesses that you bought at a fair price. More importantly, keep reading this newsletter for high-quality updates along the way. I’ll be keeping you updated with any major M&As, global conflict or political news, and business stories.
Something to note: the market only loses optimism when there’s uncertainty. Once Trump is in office, and once earnings season is behind us, we should see a real start to what this year holds in the markets, as there will be less scheduled uncertainty and anticipation for the market to react to. The market enjoys clarity, even if only for a short amount of time.
FINANCE
a. 💰 J&J acquires Intra-Cellular Therapies
Johnson & Johnson is acquiring Intra-Cellular Therapies, a neurological drug company, for a massive $14.6 billion to strengthen its central nervous system disorder drug portfolio. The deal is expected to close in early 2025 and gives J&J access to Caplyta, the only FDA-approved drug for bipolar disorder and schizophrenia (J&J also now owns many mental health drugs in trial).
This acquisition is the largest of 2025 so far and just so happened to be announced days before Donald Trump’s presidential inauguration, with an incoming administration expected to be supportive of large M&As. More in biotech: J&J also recently acquired Shockwave Medical for $13 billion, and Eli Lilly announced its acquisition of Scorpion Therapeutics for $2.5 billion.
b. 🤝 Amazon invests $5 billion in Mexico
Amazon Web Services (AWS) announced plans this week to invest $5 billion in Mexico over the next 15 years, along with its new cloud infrastructure, AWS Mexico (Central) Region. This new region will allow AWS customers to run their apps locally and is expected to add $10 billion to Mexico’s GDP while also creating 7,000 jobs in the AWS supply chain.
Data centre projects in Mexico are growing fast (though not as fast as in the U.S.), with tech companies, particularly Amazon, Google, and Microsoft, committing to spend over $7 billion in the next five years. The only problem for Mexico—as it is for many countries investing in data centre infrastructure—is that they don’t yet have enough energy capacity to support bigger projects. This problem will erode with time, but it’s been the largest headwind for countries and cloud businesses.
Related articles:
BUSINESS
c. 🧑⚖️ U.S. TikTok ban, almost complete
There are only days left before ByteDance, the owner of TikTok, is forced to sell its U.S. assets or face a nationwide ban in America. A few weeks ago, the U.S. Supreme Court heard arguments on the TikTok law, and it’s highly likely they uphold it. Meaning that by Jan. 19, 2024, the United States will have no TikTok.
Trump has said he plans to save TikTok, but there’s a very slim chance he will intervene or convince ByteDance to sell the company before the bandate1. In fact, TikTok is already preparing to shut down its operations. After the ban, TikTok will be removed from app stores, and all updates or web access will be blocked. People can still use the app if they have it downloaded, but without updates, it’ll eventually become obsolete.
Related articles:
d. 🎮 Nintendo announces Switch 2
After nearly eight years, Nintendo has officially announced its next generation of the Switch… the Switch 2, set to launch in early to mid-2025. On Thursday, Nintendo posted a teaser video on social media showing the newly designed console with a much larger screen and a redesigned Joy-Con. (More details are expected at Nintendo Direct on April 2.)
The Switch 2 will be backwards compatible with all physical and digital Switch games (meaning you can play Switch games on the Switch 2). Since the release of the original Switch back in 2017, the console and its respective software have generated close to $80 billion in revenue for Nintendo. With new proprietary games coming for the Switch 2—like Mario Kart 9—and high anticipation for this console after so many years… one word: bullish.
POLITICS
e. 🪖 Israel-Hamas ceasefire, reached
Israel and Hamas have officially reached a ceasefire deal in Gaza, pending Israeli government approval (as of the time of writing, Israel’s office has said it will be approved within hours). The agreement includes a six-week ceasefire, the phased release of hostages in exchange for Palestinian prisoners, and increased humanitarian aid. The deal would begin as early as Sunday.
The agreement is mediated by Qatar, Egypt, and the U.S., and is meant to reduce tensions in the Middle East as a whole. The ceasefire has three phases: releasing hostages, negotiating a permanent truce, and reconstructing Gaza under international supervision. It’s not a guarantee of everlasting peace, of course, but it’s a step toward that direction. And that’s what matters.
Related articles:
📚 Book of the Week
For every book purchased using the links below, 100% of affiliate commissions are donated to charity. (Amount donated so far: $31.11.)
My full bookshelf: Here.
Fooled by Randomness - Nassim Nicholas Taleb
Book Description:
Fooled by Randomness is the word-of-mouth sensation that will change the way you think about business and the world. Nassim Nicholas Taleb–veteran trader, renowned risk expert, polymathic scholar, erudite raconteur, and New York Times bestselling author of The Black Swan–has written a modern classic that turns on its head what we believe about luck and skill. This book is about luck–or more precisely, about how we perceive and deal with luck in life and business. Set against the backdrop of the most conspicuous forum in which luck is mistaken for skill–the world of trading–Fooled by Randomness provides captivating insight into one of the least understood factors in all our lives.
Writing in an entertaining narrative style, the author tackles major intellectual issues related to the underestimation of the influence of happenstance on our lives. The book is populated with an array of characters, some of whom have grasped, in their own way, the significance of chance: the baseball legend Yogi Berra; the philosopher of knowledge Karl Popper; the ancient world’s wisest man, Solon; the modern financier George Soros; and the Greek voyager Odysseus. We also meet the fictional Nero, who seems to understand the role of randomness in his professional life but falls victim to his own superstitious foolishness. However, the most recognizable character of all remains unnamed–the lucky fool who happens to be in the right place at the right time–he embodies the “survival of the least fit.” Such individuals attract devoted followers who believe in their guru’s insights and methods.
But no one can replicate what is obtained by chance. Are we capable of distinguishing the fortunate charlatan from the genuine visionary? Must we always try to uncover nonexistent messages in random events? It may be impossible to guard ourselves against the vagaries of the goddess Fortuna, but after reading Fooled by Randomness we can be a little better prepared.
Thanks for reading. Feel free to reply to this email or comment on the web if you need anything—I always reply. If you enjoyed today’s issue, feel free to share it with friends and family.
All the best,
Jacob
All my links here.
Bandate: the date of the ban mandate. Clever, I know. I thought hard on coming up with this.