First jobs number of 2025

The January 2025 jobs report showed that the U.S. economy added 143,000 jobs, falling short of expectations, while the unemployment rate declined to 4.0% from 4.1%. Wage growth remained strong, with average hourly earnings rising 0.5% for the month and 4.1% year-over-year. The report also included a downward revision of job growth for the 12 months ending in March 2024, with 598,000 fewer jobs created than previously estimated. Despite slower hiring, gains in healthcare, retail, and government sectors suggest a resilient labor market, while the Federal Reserve is expected to maintain its current interest rate policy for now.

• Today, we got our first glimpse of the state of the labor market for 2025
• While the number came weaker than expected, the real picture is murkier
• In January, the Census Bureau updated its population estimates
• Given the sizable immigration last year, the government adjusted its estimate of the size of the labor force higher
• This makes it hard to compare the figures from December to January
• We will get a clearer picture of the labor market as the year continues
• What is more important is that wages rose more than expected and are running over 4% higher than last year
• If wage gains are not absorbed by productivity, this could have an inflationary impact
• Importantly, we have yet to see the impact of Trump’s effort to shrink the Federal workforce

Gold at all-time-highs again

Gold prices have recently surged to record highs, with spot gold reaching $2,882.16 per ounce on February 5, 2025. This increase is primarily driven by escalating geopolitical tensions, particularly the intensifying U.S.-China trade war marked by reciprocal tariffs. Investors are flocking to gold as a safe-haven asset amid these uncertainties. Additionally, speculation about the U.S. Treasury potentially revaluing its gold reserves to address fiscal challenges has further bolstered gold's appeal.  Analysts anticipate that these factors, combined with robust central bank demand, could propel gold prices to $3,000 per ounce in the near term.

• Gold is one of the oldest forms of money and a store of value
• Gold tends to go up in price during times of geopolitical uncertainty
• Given the unpredictability of Trump’s actions, it is not surprising that there is heightened demand for the precious metal
• In addition, there continues to be demand for gold from non-US central banks as countries continue to try and move away from their dependency on US dollars
• The news about our new Treasury Secretary considering revaluing the US gold reserves to the current market price is interesting
• The US currently holds 261.5 million ounces of gold, but they value this at $42.22 per ounce, its price in 1973
• If this gold were to be revalued to the current market price, the US treasury would recognize a gain of over $700bn

Despite DeepSeek, tech CapEx keeps growing

The "Magnificent Seven" tech giants have announced massive capital expenditures (CapEx) in recent weeks, primarily to expand their AI infrastructure. Amazon plans to invest over $100 billion in AI-focused data centers, while Microsoft is allocating approximately $80 billion to build AI-enabled facilities worldwide. Alphabet (Google) has increased its CapEx budget to $75 billion, a 42% jump from the previous year, and Meta Platforms plans to spend between $60 billion and $65 billion on AI investments. These aggressive spending plans highlight the ongoing AI arms race among the top tech firms as they seek to maintain dominance in the rapidly evolving digital landscape.

• The news from DeepSeek over the last few weeks has been negative for certain AI stocks
• Despite this, the major tech companies have continued to announce massive CapEx related to AI infrastructure
• While these CapEx announcements reflect the board and executive level plans for these companies, they are by no means set in stone
• If the evolution in AI development does not require as much infrastructure as we currently expect, these plans could be cut back
• It will be important to closely follow the developments in the space as winners and losers will become more evident as time goes on

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