This Week's Key Financial Catalysts

It was a key week in the financial markets for the U.S. with President Trump’s first week in office and the shotgun firing of many executive orders and announcements surrounding AI investment, bitcoin, energy, and interest rates. Corporate earnings were also a major focus this week as the 4th quarter earnings season ramps up with several earnings winners.

Catalyst 1 – New President, New Fiscal Policy

Jim Cramer of CNBC pointed out this week how refreshing it is to focus on market drivers beyond the Federal Reserve. A major catalyst came as President Trump began his second term with a flurry of executive action, signing 26 executive orders on his first day—a record compared to any president since George Bush Senior. By comparison, recent two-term presidents have averaged 328 executive orders over their tenures. In his previous term, Trump issued 220 executive orders, giving him ample time to exceed that number over the next four years. While the sheer volume of orders on day one makes them difficult to summarize, several are already facing legal challenges, with many potentially influencing the economy.

One key point for investors was the absence of any immediate tariff announcements in these orders, which helped drive stocks higher on Tuesday. However, Trump has previously indicated that tariffs may be on the horizon, including a 25% tariff on Canadian and Mexican goods and a 10% tariff on Chinese imports, potentially starting as soon as February. If such measures are announced next week, they could dampen the market's recent bullish sentiment.

Investors closely monitored several key announcements from Trump, particularly those concerning AI investment, cryptocurrency, energy, and interest rates. On Wednesday, following rumors reported by CBS News, Trump unveiled "Project Stargate," a $100 billion initiative aimed at building AI infrastructure through private investment, with potential to expand to $500 billion over four years. Initial funders include SoftBank, OpenAI, Oracle, and MGX. This announcement sent ripples through semiconductor stocks and major AI players like Arm, Microsoft, Nvidia, and Oracle. Additionally, second-order beneficiaries, such as companies involved in power generation and cooling systems, saw gains this week.

On Thursday, Trump issued an executive order establishing a task force to develop pro-crypto regulations and potentially create a digital asset reserve. Bitcoin hit a record high of $109,300 on inauguration day before stabilizing in a narrow range for the rest of the week.

At the World Economic Forum in Davos, Trump addressed several international issues. He called on OPEC and Saudi Arabia to lower oil prices, encouraged NATO member nations to raise defense spending to 5% of GDP, and invited businesses to manufacture domestically in the U.S. for tax incentives—or risk facing tariffs on their exports. Additionally, Trump signaled his intention to pressure the Federal Reserve for lower interest rates.

Oil prices reacted modestly to these developments, with West Texas Intermediate Crude falling from $76.37 to settle at $74.62 by Friday. The 10-year Treasury yield rose slightly this week to 4.626%, up from 4.609%. Investors are now bracing for potential tariff announcements and further policy updates, which could significantly influence market momentum in the weeks ahead.

Catalyst 2 – Earnings

This week’s earnings announcements featured notable standouts across several sectors:

Netflix (NFLX) exceeded expectations by adding a remarkable 18.91 million new subscribers last quarter, ending 2024 with 301.63 million global subscribers. The company also raised its 2025 revenue guidance above consensus, driven by plans to increase prices. Despite providing lower earnings and revenue guidance for Q1, Netflix shares surged 14.8% on Wednesday due to the upbeat full year outlook.

GE Vernova (GEV), the renewable energy and gas power spinoff from General Electric, reported a 140% increase in earnings per share and 5% revenue growth, though both figures fell short of estimates. While the wind segment continued to underperform, the electrical power division saw a 28% jump in orders, driven by strong demand for grid equipment and services. On Friday, the company announced a partnership with NextEra Energy to identify strategic locations for new grid generation. GE Vernova shares have soared over 265% since its April IPO.

GE Aerospace (GE) delivered stellar results, with earnings climbing 103% and revenue growing 16%, marking some of the company’s strongest performance in years. Management raised its 2025 revenue guidance above consensus, announced a 30% dividend increase, and approved a $7 billion stock buyback plan. Shares reached an all-time high on Thursday following the news.

Electronic Arts (EA) faced a sharp 16.7% drop in its stock on Thursday after reporting disappointing results. Some of the company’s popular franchises have lost appeal, and sales for its highly anticipated Dragon Age update fell well below expectations. EA also lowered its guidance for Q3 and fiscal year 2025.

Union Pacific (UNP) climbed 5.2% after posting solid earnings, supported by easing inflation, lower fuel prices, and improved productivity. These gains came despite weak coal demand, which continues to weigh on its operating ratio. Conversely, competitor CSX (CSX) reported in-line results on Friday, leaving its stock down slightly.

Texas Instruments (TXN) fell on Friday after providing disappointing forward guidance, despite beating earnings and revenue expectations for the quarter. Challenges stemmed from the company’s industrial segment, which accounts for 40% of its annual revenue and posted another quarter of year-over-year declines. While its personal electronics and communication equipment segments performed steadily, the automotive market contracted 5% for the quarter, reversing prior growth of 7-8% due to weakness in Europe, the U.S., and Japan. This weighed on sentiment across the semiconductor space.

Company News

A notable winner this week was Twilio (TWLO) from a reaction to its investor day Friday. The company increased guidance for Q4 and discussed its bullish guidance on margins and free cash flow. It raised margin guidance from 16.1% in Q3 to the 21-22% range over the next few years. It expects $3 billion plus of cumulative cash flow from now and 2027, up from last year’s $650-675 million.

Novo Nordisk (NVO) was up Friday reversing a short-term trend of declining stock prices on early-stage results for another obesity drug trial with an achieved estimated body weight loss of 9.7% on 1.25mg over 20 weeks, 16.2% on 5mg over 28 weeks, and 22% on 20mg over 36 weeks.

Chart of the Week

It’s only been a few weeks in 2025, but stocks are already up nicely after a sub-par Santa Claus Rally. Of note is the outperformance of the S&P 400 Mid Cap Index which stands 123 basis points above the S&P 500. With all the talk about tariffs and the rise in the dollar, these are headwinds that small companies mainly operating in the U.S. have less of an influence on. It will be important to watch small and mid-cap indexes over the next several months if President Trump plans to reignite trade wars with our North and South American partners as well as with China and Europe. If things get heated, the small and mid-cap space may deserve a higher allocation in moderate to aggressive investors’ portfolios.

Next Week

We get key Magnificent 7 names reporting earnings starting on Wednesday with Microsoft, Meta Platforms, and Tesla with Apple on Thursday. It will also be a week for the Fed with a meeting on Tuesday and Wednesday. Right now, it is widely expected they will leave rates and their policy message unchanged, but the presser Wednesday with Chairman Powell may be a whole thing entirely with the Q&A session likely to address the central bank’s political independence and the path for interest rates. Finally, the Advance Q4 GDP report and the PCE Price Index will be released – two key areas of interest for investors, growth and inflation. There’s also the expectation we’ll continue to get more announcements out of Washington.

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