Market Uncertainty Ahead: Why Earnings and Tariffs Could Shape 2025

Happy Friday (TGIF)! I hope you all had an amazing week, and if you didn’t, well, there isn’t much I can do—but things do tend to get better with time, so there’s that.

It’s been a pretty hectic start to the new year within the financial markets. Trump and his team launched a memecoin, and just two days later, he became President. Markets have seen increased volatility, Bitcoin is still holding above $100k, Solana almost hit $300 per coin, and it seems like everyone on crypto Twitter is becoming a millionaire.

Within the equities market, the demand for call options is the strongest it has been in a while. The S&P 500 recently hit all-time highs again, while the Nasdaq and Dow Jones trail behind. Clearly, the markets appear to be very optimistic given all the available information.

With all that said (and I’m sure I’ve missed a few other events), we are only four days into a new administration in the White House. Let that sink in…

Now, let’s talk about what you should be aware of in the coming weeks.

Mag 7 Earnings

While the markets are very optimistic currently, it is important to note key events on the horizon that could quickly shift market sentiment. One of those major events is earnings season (everyone’s favorite!).

Later this month, on January 29th, Tesla (TSLA), Microsoft (MSFT), and Meta (META) are all set to report earnings after market close.

The following day, on January 30th, Apple (AAPL) will report earnings after market close.

To kick off February, Google (GOOGL) reports earnings on February 4th after market close, followed by Amazon (AMZN) on February 6th.

Finally, Nvidia (NVDA) will report its earnings on February 26th after market close, which, as usual, will be a highly anticipated event.

Why are these earnings important? For one, these are the companies that have been holding up the overall market for the past few years. In 2023, they were responsible for over 70–80% of the S&P 500’s total returns during market rallies, primarily driven by advancements in Artificial Intelligence.

These are also what I like to call the “normie” stocks, meaning they are the primary stocks that most casual investors tend to invest in through certain funds (e.g., hedge funds, mutual funds, etc.). Tracking these stocks is crucial because markets often move based on sentiment. If the upcoming earnings reports highlight a potential slowdown in growth forecasts, these funds may further reduce their exposure to these companies, which would have a significant impact on the market over time.

Inflation Concerns

Trump’s potential tariffs on China, Canada, and parts of Europe could create additional challenges for the Federal Reserve. While inflation has shown signs of cooling, new tariffs could drive up the costs of imported goods, adding upward pressure to inflation. This is particularly concerning in an environment where the economy is already slowing.

The combination of sticky or rising inflation with weakening growth creates the dreaded scenario of stagflation, which is the last thing the Fed wants to navigate. Tariffs could force the Fed to keep rates higher for longer or even consider further hikes, all while trying to avoid tipping the economy into a deeper slowdown. This delicate balancing act underscores how geopolitical decisions could have far-reaching consequences on monetary policy.

Concerns about stagflation are one of the key reasons yields have remained strong, as uncertainty looms over Trump’s potential tariffs. These tariffs could not only drive up costs and reignite inflation but also undermine the Fed’s progress in stabilizing the economy. With the risk of inflation becoming sticky or even rising in the face of a slowing economy, investors are bracing for a scenario that could force the Fed into tougher decisions, further complicating the outlook for monetary policy.

Conclusion

In conclusion, keeping a close eye on the upcoming earnings reports from the rapid-growth companies discussed is critical. If we see a shift in sentiment around these market leaders—combined with the looming risks of tariffs and heightened inflation—it could lead to a longer and more significant market downturn than expected.

As of now, the economy appears to be in a solid position. GDP growth is projected to rise at a healthy rate, inflation is showing signs of cooling, and consumers are continuing to spend. However, markets are dynamic, and conditions can change quickly. As an investor or trader, your job is to stay informed and ready to adapt to evolving circumstances. Being proactive and responsive to new data and market sentiment will position you to navigate any challenges and uncertainties that lie ahead.

To my traders: trade safely, manage risk, and live to fight another day.

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