Weekly Update - WE Feb 21, 2025
Inflation, little interest in MAG7
Market Context
Recap of Last Week
Last week was all about inflation. Although CPI and PPI came in relatively hot, the details that feed PCE were relatively cold. The market did not panic and 10y yield ultimately ended up lower.
Fed speakers indicated that they are not considering the end of QT, nor rate cuts, anytime soon.
VIX came down and closed below 15. VVIX is also low below 100. Short volatility has become quite crowded
We saw a lot of exuberance in meme-ish stocks, such as PLTR, HOOD, and HIMS. On the other hand, the market lost interest in MAG7, except for META.
Policy-wise, the new administration continued with announcements around DOGE, Ukraine, the Middle East, etc.
Current Narrative
The market faces little risks now with inflation, growth, and yields all pointing in the right direction. Moreover, the market has priced in tariffs or perhaps just become desensitized to policy announcements.
Key Upcoming Catalysts/Risks
Nvidia earnings
Tariffs on Europe
Trading Prep
Achieve full allocation in equities
Start entering into long volatility trades
I have second thoughts about my long uranium position. URA and U.U did not perform, while OKLO is one of the best performers YTD. Furthermore, if the conflict in Ukraine gets settled, Russian Uranium may start flowing West again. I may exit and move the allocation to QQQ.
I am exploring the data center and semiconductor themes. I have not finished my research yet, but my initial takeaways are:
Data center occupancy and pricing show demand exceeds capacity.
Supply chain bottlenecks, namely GPUs and power bottlenecks, should tame data center buildout so that capacity remains below demand.
Semiconductor cycles seem to be aligning and are bullish semiconductors. The only question mark is automotive, as that will be hit by tariffs on Europe.
I am waiting for more clarity around chip export restrictions before making more moves around NVDA.
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