Unadorned Notes: January 26-28, 2025
U.S. Consumer Confidence Falls Again; U.S. New Home Sales Rise; Tech Stocks Seesaw Amid AI Shock; Gold Prices Poised for Records; Judge Blocks Trump Funding Freeze
Economics, Finance, and Business
U.S. Consumer Confidence Falls Again: U.S. consumer confidence declined for the second consecutive month in January 2025, with the Conference Board’s index falling to 104.1 from 109.5 in December 2024. Economists had expected a reading of 105.6, highlighting weaker-than-anticipated sentiment. Concerns about inflation and labor market conditions were key drivers of the drop, as reflected in write-in responses emphasizing price pressures. Inflation expectations rose to 5.3% over the next 12 months, compounding worries about economic stability. The University of Michigan’s sentiment index also fell, signaling broader concerns about inflation and unemployment.1
U.S. New Home Sales Rise: New U.S. single-family home sales increased by 3.6% in December 2024 to a seasonally adjusted annual rate of 698,000 units, exceeding forecasts of 675,000. Sales for November 2024 were revised higher to 674,000 units, contributing to a 2.5% annual gain in 2024. Rising inventory levels and high mortgage rates have tempered price growth, with the median new home price increasing 2.1% year-on-year to $427,000. Regional trends showed strong sales growth in the Northeast and West, offset by declines in the South and Midwest. Builders have focused on smaller, more affordable homes, but elevated inventories may limit future construction.2
Markets Balance Optimism and Risks: U.S. financial markets showcased resilience in late January, with the S&P 500 reaching a record high despite later decline. Analysts anticipate 7.5% year-over-year earnings growth for S&P 500 companies, the highest since 2021, underscoring corporate adaptability. The macroeconomic landscape showed mixed signals, with manufacturing rebounding but consumer sentiment declining amid inflation concerns. Policy shifts from the new administration, including a $500 billion AI infrastructure initiative, highlighted a focus on technological and energy priorities, per
.3Tech Stocks Seesaw Amid AI Shock: The release of China’s DeepSeek AI model, which purportedly rivals U.S.-based generative AI systems at a lower cost, triggered a sharp selloff in technology stocks, wiping out nearly $1 trillion in market cap. Nvidia suffered the largest single-day loss in its history, dropping 17% on January 27, 2025, but rebounded 8.8% the following day, recovering 44% of its losses. Apple emerged as a relative winner, gaining 4% as investors reassessed its cautious AI strategy. Analysts debated the long-term impact of DeepSeek, with some viewing it as a major competitive threat and others downplaying its significance. The selloff underscored growing concerns over U.S. dominance in AI, as Washington weighs policy responses to China’s advancements in the sector.4
QZ’s Comment: With the S&P 500 hitting an all-time high last week, a pullback is only a matter of time. It is arguably the case that there is *more* compute demand to be met, as open source, presumably “cost-effective” models are now accessible to smaller players and edge use cases. And why wouldn’t hyperscalers continue to scale as foundational models become more efficient to train and iterate? So, none of these could explain why the AI stocks nosedived on Monday “all because of DeepSeek”, which increasingly looks like a “coordinated operation” by a few market and non-market participants at the margin. That said, these stocks have always been volatile, while the broader U.S. market held up relatively well thanks to its unparalleled depth and liquidity. Please note that the above comment is NOT investment advice.
Gold Prices Poised for Records: Gold prices are forecast to average $2,756 per ounce in 2025, driven by economic uncertainty, inflation concerns, and geopolitical risks. The metal surged 27% in 2024, its best performance since 2010, despite a brief retreat after the U.S. election and reduced Federal Reserve rate-cut expectations. Investor demand remains strong amid trade tensions and safe-haven buying, though high prices may curb jewelry demand in Asia. Silver is projected to average $33.10 per ounce, supported by industrial demand but hindered by weak investment interest. Analysts expect gold to remain a key hedge against global risks in President Donald Trump’s second term.5
U.S. Politics, Policies, and Geopolitics
Judge Blocks Trump Funding Freeze: A federal judge temporarily halted President Donald Trump’s attempt to freeze federal grants and loans, preventing immediate disruptions to Medicaid and other programs. The administration justified the pause as a review to align spending with executive orders targeting energy, diversity, and social policies. Critics argued the move was unconstitutional, prompting lawsuits from nonprofit groups and 22 state attorneys general. Confusion over the freeze led to widespread concerns, with agencies and organizations uncertain about which funds would be affected. The decision marks a broader effort by the administration to reshape federal spending priorities, with potential economic and political ramifications.6
Trump Orders Federal Workers Back: President Donald Trump mandated a full return to office for federal employees, ending most remote work arrangements. Workers unwilling to comply can resign by February 6 and receive a severance package covering pay through September 30, 2025. The policy aims to reduce the federal workforce and aligns with broader efforts to reshape government agencies. Critics argue the move undermines civil service protections, while supporters praise it as a cost-cutting measure. Agency heads retain discretion to grant exemptions, but most remote workers must decide soon whether to return or resign.7
Trump Fires Key Labor Officials: President Donald Trump fired NLRB General Counsel Jennifer Abruzzo and board member Gwynne Wilcox, leaving the agency without a quorum to operate. The dismissals effectively shut down the board, prompting criticism from labor advocates who claim it undermines workers’ rights. Trump also removed two Democratic EEOC commissioners, including Charlotte Burrows, sparking legal challenges over the unprecedented firings. Critics argue these actions aim to weaken federal worker protections, while supporters see them as part of Trump’s broader push to reduce government. Legal battles loom, as removed officials claim violations of federal law and Supreme Court precedent.8
U.S.-Colombia Deportation Deal Reached: President Donald Trump temporarily withheld tariffs on Colombian imports after President Gustavo Petro agreed to accept deportation flights carrying Colombian migrants. The agreement followed a standoff in which Petro initially blocked U.S. military planes, citing concerns over the treatment of deportees. In response, Trump had threatened 25% tariffs on Colombian goods, visa bans for officials, and stricter inspections of Colombian nationals. Petro countered with proposed tariffs on U.S. imports before ultimately conceding to U.S. demands. The deal marks a significant development in Trump’s push for mass deportations and tougher border policies.9
Egypt, Jordan Reject Gaza Plan: President Donald Trump proposed resettling Gaza’s 2.3 million residents in Egypt and Jordan, citing the destruction in Gaza from Israel’s war with Hamas. Both countries rejected the plan, warning it would destabilize the region and undermine prospects for Palestinian statehood. Palestinian leaders and human rights groups condemned the idea as a form of ethnic cleansing, with fears it would permanently displace Gazans. Egypt and Jordan highlighted the security risks of hosting militant groups and cited their already strained resources from hosting millions of refugees. The proposal risks straining U.S. relations with regional allies as Trump considers tariffs or aid cuts to compel compliance.10
South Korean President Indicted for Insurrection: South Korea’s impeached President Yoon Suk Yeol has been indicted on charges of leading an insurrection after declaring martial law on December 3, 2024. The controversial decree, lasting six hours, aimed to ban political activity and control the media, triggering a political crisis and his impeachment on December 14, 2024. Yoon, in solitary confinement since his arrest on January 15, 2025, denies intending full martial law and argues it was a warning to break political deadlock. Prosecutors allege Yoon orchestrated the insurrection alongside top military officials, with charges carrying potential life imprisonment or death. The Constitutional Court has 180 days to decide whether to remove him from office or reinstate his powers.11
Rebels Seize Goma Amid Chaos: Rwanda-backed M23 rebels have advanced into Goma, a major regional hub in eastern Congo, escalating tensions and forcing thousands to flee. The conflict, rooted in control over mineral-rich areas, has displaced millions and raised fears of further destabilization in the region. The Congolese government has accused Rwanda of direct aggression, while Rwanda alleges Congo supports anti-Rwandan militias. The UN and international community have condemned the rebel advance, urging an immediate withdrawal. Goma’s capture threatens humanitarian efforts and global mineral supply chains critical for technology production.12
