Author: G Squared Private Wealth

As we kick off February, markets are weathering multiple assaults on their bull run. We should be rejoicing a pickup in profit growth across multiple sectors with the S&P 500 on pace for a 10% growth in profits vs. 7% anticipated. But earnings are taking a backseat to politics as the Tariff War 2.0 began in full 2/1/25. The opening salvos of Tariff War 2.0 began against Canada and Mexico with a 25% tariff on all imports from Mexico and Canada, exempting energy resources from Canada at 10%. China will also see a 10% tariff on all imports. Importantly, the US government is also suspending the “de-minimis” exemption for packages and shipments under $800 addressed to individuals. The de-minimis exemption has been a huge driver of global e-commerce – think Temu, Shein, or baubles from Esty international sellers. The point of the de-minimis exemption was to allow insignificant and small items to be disregarded for regulations, duties, or taxes in the context of international trade. Suspending this exemption makes international e-commerce exponentially more difficult and expensive.

Learn More from February 2025 Market Brief – The Uncertainty Premium

Markets are reacting sharply to a new potential threat: what if the USA is not the leader in AI technology and others have figured out how to do it better and more efficiently? That potential game-changing question was brought up by DeepSeek, a Chinese AI app that was recently launched in the US. DeepSeek is majority owned by Lian Wenfeng’s quant AI focused Hedge Fund, High-Flyer. They announced the development of DeepSeek in March 2023 and by all measures have exceeded expectations. This app was developed as a response to OpenAI’s ChatGPT, which launched in late 2022 and caused a large scramble to keep up by Chinese tech firms. DeepSeek is like ChatGPT but with a few noticeable differentiators. DeepSeek develops open-sourced free AI models, which means multiple developers can inspect and improve on the software. Their first opensource AI model R1 competes with ChatGPT in areas such as reasoning and code generation and has become the #1 download in the iPhone app store as an AI assistant App. In a very short time (days!) they have overtaken ChatGPT as the top-rated free app. China is flexing its AI muscles this week, and US tech companies seem to be on the back foot.

Learn More from January 2025 Market Brief – Game Changer?