1. The move in US long interest rates is very unusual.

The Fed has cut interest rates 100 basis points since september, and over the same period, 10-year interest rates are up 100 basis points.

The market is telling us something …Is it the unsustainable fiscal deficit? Is it tariffs? Zombie inflation? Or all of those together…

2. Solar stocks are up more than 10% in 2025. But there is a long way to go after the -30% in 2024.

“Solar, wind and battery-storage projects are the fastest way to increase power supply to meet the needs of data centers in the coming years”, says Carly Davenport, head of US power and utilities research at Goldman Sachs.

The Trump Administration is unlikely to pursue a full-scale repeal of renewable-energy tax credits in Biden’s Inflation Reduction Act because many of those benefits are going to republican states, she says.

3. The Year of “Agentic AI” & Software Catch-Up.

As the name implies, AI Agent technologies give agency to the software program – moving the interaction with the algorithms from reactive (a chatbot responds to a prompt from the user) to proactive (an agent proactively suggests the next step in a workflow).

Similarly, moving from static systems operating within a well defined set of rules to a dynamic system working to find the best solutions to an evolving set of problems, with an increasing amount of autonomy.

Gartner estimates by 2028, 33% of enterprise software applications will include agentic AI, up from less than 1% in today. The industry analyst group estimates these agents will allow 15% of day-to-day work decisions to be made autonomously.

As in previous technology cycles, the equity markets have been poised for the moment when semiconductor outperformance gives way to the software stocks.

4. European defense stocks love Trump.

A Goldman Sachs basket of European defense firms — including Rheinmetall, Leonardo, BAE Systems and Thales — has been a strong outperformer since the US election and spiked another 4% following Trump’s statement that NATO members should spend 5% on defense.

Bank of America analysts note that European defense orders have been very positive over the past 18 months. They expect strong organic growth of over 12% through 2026, supporting a sector EPS CAGR of about 23%.

“Valuations are elevated versus history, but the growth outlook remains supportive,” they say.

5. Asian stocks declined as the prospect of slower-than-expected interest rate cuts by the Federal Reserve and continued weakness in the Chinese economy hurt sentiment.

The Biden administration’s plan for one additional round of restrictions on the export of artificial intelligence chips also weighed on risk appetite.

The MSCI Emerging Markets Index has fallen 10% from an October high, on track to enter a technical correction.

Investors are now awaiting the National People’s Congress meeting in March for Beijing’s 2025 growth target and detailed plans to boost consumption.

“The harder Trump pushes on tariffs, the more Chinese stocks could decline, and the better this trade opportunity might become, as China’s stimulus measures would depend on the scale of tariff increases,” said Bo Pei, an equity research analyst at US Tiger Securities.

6. China’s 30-year government bond yield has dropped below Japan’s 30-year yield for the first time in history.

Over the last 4 years, China’s bond yield has declined by a whopping 215 basis points.

This comes as China’s economy has slowed and experienced 6 straight quarters of deflation, the longest streak since 1999.

At the same time, Japan’s bond yield has risen 160 basis points as inflation has picked up in the country. In the past, Japan had seen 3 decades of economic stagnation and had suffered 25 years of deflation starting in the 1990s.

Is China entering its own "Japanification" economic phase?

Not a subscriber yet?