WinCap Financial

What do I think of a national crypto reserve? A national crypto reserve poses significant risks due to the potential for fraud and the challenges of government intervention in picking winners. **Fraud Risks**: Cryptocurrencies are susceptible to fraud, including hacking and scams, due to their digital and often opaque nature. Establishing a national reserve increases exposure to these risks, requiring extensive and costly security measures to safeguard assets. The anonymous nature of many crypto transactions also complicates fraud detection and prevention efforts. **Government Picking Winners**: By establishing a crypto reserve, a government effectively endorses particular cryptocurrencies, potentially influencing market values and dynamics. This could lead to market distortions and create an uneven playing field, where government-endorsed cryptocurrencies are favored over others. Such intervention could stifle innovation and competition within the rapidly evolving digital currency landscape, and lead to allegations of favoritism or market manipulation. Overall, the risks of fraud and the perception of the government choosing market winners make a national crypto reserve a precarious strategy that could undermine trust in financial systems.

This week, market attention will be centered on earnings from major retailers and a key jobs report. Target and Best Buy are set to release their earnings on Tuesday. This will be followed by reports from Macy's, Kroger, Costco Wholesale, Gap, and Burlington Stores on Thursday. Additionally, the labor market will be in the spotlight with the Bureau of Labor Statistics' February jobs report scheduled for release on Friday. According to the consensus forecast from FactSet, February's nonfarm payrolls report is anticipated to show an increase of 160,000 jobs, up from January's gain of 143,000 jobs. The unemployment rate is expected to hold steady at 4%. Meanwhile, average hourly earnings are projected to decrease by 0.3% month-over-month, down from the previous month's increase of 0.5%. If unemployment comes in higher than expected, anticipate talks of rate cuts to begin again. While the market may look to blame DOGE for a weakening job market.

The S&P 500 has lost its year-to-date gains due to declines in mega-cap tech stocks but is still 15% higher than last year, influenced by growth concerns and declining consumer confidence. Nvidia shares rose by 4% after initially dropping 8.4%, following better-than-expected fourth-quarter earnings, making it a potential attractive entry point for investors. Ongoing economic growth, strong AI investments, and possible Federal Reserve rate cuts are anticipated to support the bull market despite negative investor sentiment. There is a potential for market correction, highlighting the need for diversification as market leadership shifts away from U.S. large-cap and tech stocks. Expect key earnings reports from major retailers and the February jobs report, predicting a gain of 160,000 jobs with the unemployment rate remaining at 4%.

Takeaways from NVIDIA's earnings Mgmt. guided Q1 Rev above at the midpoint, Gross margins below, with improvement post-Blackwell ramp to mid-70s later in 2025 despite complex configurations. Analysts were largely upbeat following another strong print and guide, with Blackwell strength a key highlight, dispelling prior supply worries. Although Q1 gross margin outlook, networking weakness, and China headwinds caused slight concerns, it is anticipated that gross margins recover through the year with networking rebounding as Blackwell ramps. Furthermore, mgmts. reassuring commentary on AI reasoning compute needs addressed some apprehension around DeepSeek and ASICs.

What's happening in the stock market this week? Big highlights include the Fed's preferred measure of inflation on Friday & NVIDIA earnings on Wednesday.

- **Market Gains:** As of February 20, 2025, the S&P 500 is up 4% and the MSCI World Index is up 5%, supported by lower central bank rates and steady growth. - **Tech Stock Performance:** The "Magnificent 7" tech stocks are underperforming in 2025 after leading the market in 2024. - **Treasury Yields Stabilized:** The U.S. 10-year Treasury yield is stabilized around 4.5% following a sharp rise, with potential Fed rate cuts on the horizon. - **European Equities Leading:** European markets are outperforming, with the EuroStoxx 50 up 13%, aided by a weaker USD and positive eurozone data. - **Upcoming Reports:** Key earnings from Nvidia and others are expected, along with the PCE price index, predicting a 2.5% inflation rise, and real estate data releases.

In this week's blog we discuss: - January's Consumer Price Index showed stronger than expected price increases, with core inflation staying around 3.3%. The Federal Reserve is not expected to decrease interest rates soon, with a potential rate cut likely in the second half of the year. - A shift in market leadership is occurring, with earnings growth for the S&P 493 (excluding major tech companies) beginning to rise. European equities are outperforming, and investors are advised to focus on cyclical, value-oriented, and international investments. - U.S. markets will be closed for Presidents Day. Key events include various company earnings releases and the Federal Reserve's meeting minutes. Housing market data is also anticipated, with reports from the National Association of Home Builders and the Census Bureau. - Upcoming earnings reports feature companies like Arista Networks, Devon Energy, Medtronic, Alibaba Group Holding, Walmart, and others. Wednesday will reveal Federal Open Market Committee meeting minutes for insights into monetary policy. - January 2025 saw a decline in U.S. retail sales, illustrating economic challenges at the start of the year.

My take on the latest jobs numbers and inflation on CGTN America News. Tariffs could push up against any positive news on inflation being reported this week. Thus far, the impact from aggressive cuts in government spending and jobs have not made a dent in the tight labor market. At least up until this point, the cuts have not moved the market.

Next week, investors will focus on the latest inflation figures and a slew of fourth-quarter earnings reports. The Bureau of Labor Statistics will release the Consumer Price Index (CPI) for January on Wednesday, which is expected to come in at 2.9%. Our concern this week is that any positive news on inflation will be drowned out by tariff news. As with stocks, future guidance is more important than past results. With the Federal Reserve's interest rate reductions currently paused, investors will wait for further progress in curbing inflation. On Thursday, the BLS is set to publish the Producer Price Index (PPI) for January. Additional economic indicators to monitor next week include the National Federation of Independent Business' Small Business Optimism Index for January, which will be available on Tuesday, and the Census Bureau's retail sales data for January, scheduled for release on Friday. Earnings announcements will begin with McDonald's on Monday, followed by Coca-Cola, DoorDash, Marriott International, Shopify, and Super Micro Computer on Tuesday. On Wednesday, Cisco Systems, Robinhood, Ventas, and Vertiv Holdings will reveal their results.

This week's thoughts on the market