If we only look at the numbers, yesterday’s session wasn’t particularly memorable. The same themes as Monday’s session were repeated: defense was in the spotlight – once again – and tech enjoyed itself once more. But as for the rest – for now – the indices remain on the defensive. At all-time highs almost everywhere, but still on the defensive.

Otherwise, there’s talk of peace talks that please everyone except the Europeans, discussions about investments in defense, rumors of Intel being acquired, and once again, debates about tariffs. And the Germans are feeling hopeful about next week.

Like Yesterday, But Not as Good

The Americans were back, but it didn’t change much in the end. As I mentioned yesterday, the S&P 500 closed at an all-time high, erasing the previous record from January 23. But it was a struggle, as just a few seconds before the close, it wasn’t quite there yet. To be fair, there hasn’t been much exciting news since the long weekend.

Yes, Intel went wild, having its best session in five years with another 16% increase. We know Broadcom and TSM are circling around the semiconductor giant, although nothing concrete has come out yet. Meanwhile, in AI, Super Micro soared once again. The company has been on a tear since it got “more or less” back on track, and its recovery is impressive, although it’s still far from historic highs and will have to get through Nvidia’s earnings release next week.

Speaking of Nvidia, the company has almost fully recovered from the DeepSeek incident. Even though yesterday wasn’t its best day, the stock remains strong and well-supported. However, with its quarterly report coming on February 26, expectations are high, and any disappointment could be costly given its current valuation.

Meanwhile, U.S. markets were focused on two things: peace talks in Saudi Arabia – with Rubio and his team meeting Lavrov and his – and Trump’s declaration that he’ll likely meet with Putin before the end of February. Say what you want, but Trump seems to move faster and more effectively in talks with Putin than any G-20 member has in the past three years.

The List

The other hot topic for investors yesterday was the release of portfolio holdings from major investment moguls. Without listing everything, here are some key takeaways:

• Warren Buffett continues to reduce exposure to banks and fully exited his position in Ulta Beauty but increased holdings in Occidental Petroleum, Verisign, Sirius, and Domino’s.
• Terry Smith added Medpace and Doximity but significantly reduced other investments, reflecting a strategy similar to Buffett’s.
• David Tepper increased his tech exposure, while Bill Ackman made few changes, except for boosting positions in Brookfield and Nike while cutting back on Chipotle and Hilton.

Overall, most managers didn’t make any drastic changes, sticking to their core strategies. If we dig deeper, it seems no one wants to go against the current bullish trend, but there are doubts about what lies ahead. With Trump in power, Powell refusing to lower rates, and inflation staying stubbornly high, 2025 could still hold plenty of surprises.

In Europe, All Eyes on Germany

In Europe, the focus remained on defense stocks. People might prefer to call them “defense sector stocks” because it sounds more politically correct, but in the end, it’s still about weapons. Right now, as Macron appears eager to join the UK in Ukraine, the rest of Europe continues to strengthen its defenses – funded by taxpayers, of course.

Yesterday, the mood remained the same as the previous day, driven by defense spending and a military-like rally. The CAC 40 couldn’t close at an all-time high, but the CAC Global Return did, thanks to reinvested dividends, which supposedly allows France to compare itself to Germany’s DAX. Speaking of the DAX, it also closed at a record high, supported by defense stocks, the war in Ukraine, and a much better-than-expected ZEW economic sentiment index.

Hope for a Right-Wing Government (But Not Too Much)

The ZEW is an index that measures investor sentiment in Germany – it now also exists for the whole of EUROPE. In practice, financial experts are asked whether they are optimistic or pessimistic about the German economy in the coming months. Personally, no one’s ever asked me, but I must be too amateur for that. To put it simply: If the index is high, it means the future looks bright. But on the other hand, if the index drops, it signals “troubles ahead.” Yesterday, it was expected to be at 19.90, but it came out at 26, and last month it was just above 10. The reason for this “return of confidence in the future” clearly lies in this weekend’s elections, as there is hope for a shift to the right and a government that would (or will) provide a bit more support for the economy, as Scholz is expected to be ousted. The only thing worrying observers is the rise of the far-right.

In Summary

Yesterday was good because records were broken; it was good if you were invested in the arms sector, and it was even better if you had Intel and SMCI bought three weeks ago in your portfolio. As for today, we’re back to the topic of tariffs, because honestly, it’s been a while since we last talked about it. This morning, if you look at Asian markets, you’ll see that the automotive sector is under pressure. The Nikkei is down 0.3%, the Hang Seng is down 0.5%, and Shanghai is up 0.5%. But if you dig into the index components, you’ll see that car manufacturers aren’t celebrating. Don’t look for bad results, lowered guidance, or a flat tire – the reason lies on the other side of the Atlantic.

The Return of the Prophet

Yes, as I mentioned yesterday morning, Donald Trump was scheduled to speak last night. And he did. In doing so, he announced the upcoming implementation of 25% tariffs on car imports and around 25% on drug imports, with a gradual increase throughout the year. These tariffs will take effect at the beginning of April. Trump explained that he’s giving this “grace period” to the affected companies to allow them to relocate their factories to the U.S., enabling them to avoid paying any tariffs while hiring American workers and laying off workers where the factories were previously located. To be honest, the impact of this announcement seems relatively limited. First, there’s a time lag allowing companies to adapt, find other solutions, or strike a deal with the U.S. And second, it’s become clear that these negotiation tactics using tariffs will be a recurring theme, so companies will need to find ways to counter them or adapt.

For now, futures are slightly up, showing that the trauma of tariffs has been fully absorbed by the markets. Oil is at $72.05, gold is at $2,949, and Bitcoin is in a coma. In other words, the impact of Trump’s NEW ANNOUNCEMENT is almost zero, once again demonstrating the market’s remarkable adaptability and resilience. It’s also worth noting that Trump has no objections if the European army intervenes in Ukraine. Not sure if Putin feels the same way, but regardless, the American President’s words should keep the defense sector thriving until the end of the week. Macron and Starmer must be thrilled by Trump’s compassion.

Any News?

In today’s news, France, through its spokesperson Emmanuel Macron, announced that new “negotiations on Europe’s security” will take place in Paris today. Apparently, they want to finish off Monday’s leftovers to avoid wasting food. Needless to say, Ukraine will continue to be a hot topic today, and it would be great if Europe announced massive AI investments IN UKRAINE, which would certainly speed up the peace process. Still on the same subject, Trump believes Ukraine should hold elections as part of the peace negotiations. It’s doubtful that Zelensky will be involved in the peace process in the long run. He can always seek asylum with Brigitte and Emmanuel – they seem to get along quite well. Meanwhile, New Zealand has cut rates for the fourth time in a row, hoping to revive a sluggish economy. HSBC announced a $2 billion share buyback as its annual profit rose by 6.5%.

Today’s Numbers

Today, all eyes are on the FOMC Meeting Minutes. Once again, given the post-meeting speech, the economic data released since then, and the testimonies from Powell and his crew, it would be surprising if there were anything particularly exciting in today’s Minutes. But we’ll pretend it’s SUPER-IMPORTANT and eagerly await the transcript, hoping to find a hidden message revealing the timing and number of rate cuts in 2025.

Global Markets

Global markets continue to revolve around the same themes: Ukrainian geopolitics, defense investments, and long live artificial intelligence. Meanwhile, we’re breaking records every day, which is pretty cool. Have a great day, and we’ll catch up tomorrow morning as usual!