Tariffs, bitcoin, and Javier Milei... The omnipresent Leviathan... 'Make the West great again'... The Fed's next meeting... The Chinese government is at it again...

The elite have gathered again...

Around 3,000 attendees, including business leaders and more than 50 heads of state, all made their way to Davos, Switzerland this week for the annual World Economic Forum.

The theme of the conference is "Collaboration for the Intelligent Age." There have been a lot of discussions about the future of artificial intelligence ("AI").

Recent Stansberry Investor Hour podcast guest John Sviokla, of AI advisory firm GAI Insights, is in Switzerland taking in the conversations this week. But it's not all AI talk...

Trump on the global stage...

President Donald Trump joined the festivities via video today and spoke for more than 40 minutes.

Among other things, he talked up the idea of tariffs on companies making their products outside the U.S., and said he wants to see lower global oil prices, taxes, and interest rates, giving what sounded like a heads-up to Federal Reserve Chair Jerome Powell. Trump said...

I'm... going to ask Saudi Arabia and OPEC to bring down the cost of oil... If the price came down, the Russia-Ukraine war would end immediately. Right now, the price is high enough that that war will continue. You've got to bring down the oil price...

With oil prices going down, I'll demand that interest rates drop immediately. And likewise, they should be dropping all over the world.

Trump also repeatedly said he wants to talk to Russian President Vladimir Putin about ending the war with Ukraine and said China "has a great deal of power of that situation," referring to its economic alliance with Russia.

The rhetoric did not hurt stocks. The major U.S. indexes rose as Trump spoke, and the benchmark S&P 500 Index closed up 0.5% to make a new all-time high for the first time in more than a month. The Dow Jones Industrial Average gained nearly 1%.

On tariffs and bitcoin...

Yesterday, JPMorgan Chase (JPM) CEO Jamie Dimon told everyone to "get over" the idea of tariffs because they're good for U.S. national security. "If it's a little inflationary, but it's good for national security, so be it," Dimon said.

That's one line of thought, but not everyone agrees...

This week, BlackRock (BLK) CEO Larry Fink spoke with representatives from a sovereign wealth fund who are interested in buying bitcoin because they fear the devaluation of conventional currencies and/or inflation.

Fink, the leader of the world's largest asset manager, said the question with this fund wasn't the use for bitcoin, but whether it should allocate 2% or 5% of its portfolio to it. "If everybody adopted that conversation, it would be $500,000, $600,000, $700,000 for bitcoin."

Meanwhile, Milei was invited back...

We wondered this time last year if Argentinian President Javier Milei – who won election in 2023 amid promises to take a "chainsaw" to the government to fight hyperinflation in his country – would be invited back to the conference after his "25-minute case for freedom."

Milei's speech last year took direct aim at decades of policies (cultivated by many of those in the crowd) that Milei said had eroded capitalism in Western nations and led to "collectivism" and problems like inflation.

Earlier today, Milei took the stage again. He began by noting how much has changed in the past 12 months. "A year later, I must say that I no longer feel so alone," he said, saying that he has found allies for "freedom in every corner of the world."

He listed the names Elon Musk, Italian Prime Minister Giorgia Meloni, El Salvadorian President Nayib Bukele, Hungary's Viktor Orbán, Israel's Benjamin Netanyahu, and Trump.

Milei then delivered the meat of his provocative speech. He said socialism leads to "a society filled with resentment," with "only two types of people – those who are net taxpayers... and those who are beneficiaries of the state."

He said he wasn't talking about those who get social assistance because they don't have enough to eat, but more so "the bankers who were bailed out during the subprime crisis, the majority of media outlets" and "crony businesses that thrive off the taxes paid by hardworking individuals." He continued...

I'm talking about the world described by Ayn Rand in Atlas Shrugged, which unfortunately has become a reality. It is a system where the big winner is the political class, which becomes both a referee and stakeholder in this redistribution game... The one who redistributes is the one who keeps the lion's share...

The only thing such intervention achieves is the creation of new distortions... ultimately leading to even more poverty... As I often say in my speeches, if you believe there is a market failure, go check to see if the state is not involved. If you find that it isn't, check again.

Milei said the solution to all this is smaller government and international organizations, a reduction of the "'omnipresent Leviathan' that we all suffer under today."

So far, Milei's "shock therapy" has had results... Over the past year, his strategy has reduced Argentina's government spending by almost 30% and balanced the budget. In November, Argentina's monthly inflation rate hit a four-year low, though it's annual rise is still in the triple digits and wearing on citizens. Milei concluded in his speech...

We are witnessing the global exhaustion of this system that has dominated us for the past few decades... A silent majority is organizing... In every corner of our hemisphere, the echo of this freedom cry resonates...

If globally influential institutions like this one wish to turn over a new leaf and participate in good faith this new paradigm, it will have to take responsibility for the role played over the past decades.

He challenged world leaders to "be bold" and said he wants to "make the West great again."

We have to wonder if he'll be invited back a third time. If you're interested, you can watch the entire speech here.

Speaking of the omnipresent...

The next Fed meeting is coming up next week.

The prevailing market expectations are that the Fed will keep its benchmark bank lending rate right where it is as it pauses to weigh the higher inflation numbers of the past several months against its other mandate of "maximum employment."

Like usual, though, the market-moving information will be about the future, which will be discussed in a post-policy-meeting press conference with Powell on Wednesday.

Any commentary or outlook that suggests more rate cuts are on the table this year could be well-received by Mr. Market.

You see, after the December meeting, it was clear the Fed was signaling fewer cuts and concerns about high(er) inflation this year. The inflation reports since then haven't been overly concerning. Meanwhile, the labor market has strengthened, according to the data the Fed looks at.

We also expect to hear some chatter about how proposed Trump policies might influence Fed policy – perhaps reporters will ask Powell about the idea of Trump demanding lower interest rates. And then, we might see some social media posts from Trump in response. Who knows?

In any case, we'll have reports on what the Fed says next week.

In the meantime, in China...

Growth in the world's second largest economy is slowing... its stock market has underperformed for years... and there's a new president to deal with in the White House.

All those headlines have been enough to keep folks away from Chinese stocks. But some will be forced to buy...

In a press conference early this morning, the chairman of the China Securities Regulatory Commission explicitly told mutual funds and insurance companies in the country to buy more Chinese stocks.

For mutual funds, Chair Wu Qing said they should raise their holdings by 10% a year for the next three years. And state-owned insurers are now required to invest at least 30% of their new premiums, starting in 2025.

According to Wu Qing, these moves will add "at least several hundred billion yuan" of demand for Chinese stocks. That likely translates to more than $50 billion a year in U.S. dollars.

This isn't exactly new behavior...

The Chinese government has boosted demand for its stocks before... In September, it unveiled a list of new policies aimed at improving the financial and real estate markets. As we wrote in our September 25 edition...

[On September 24] the People's Bank of China ("PBOC") unveiled its largest stimulus efforts since the pandemic, hoping to boost an economy dealing with deflation and a property collapse that has reportedly erased $18 trillion in household wealth.

The PBOC slashed several interest rates, said it would lower the reserve requirements for banks soon, and intervened directly in the stock market. It set up facilities to allow brokers, funds, and insurers to pledge assets for liquidity to buy stocks – a first – and more.

As our colleague Sean Michael Cummings highlighted in the October 7 edition of the free DailyWealth e-letter, the policies included a big boost for stocks.

Sean wrote that China established "a 500-billion-yuan ($71.3 billion) fund for brokerage houses, mutual funds, and insurance companies to buy Chinese stocks on the open markets."

Those policies helped drive Chinese stocks higher. The Hang Seng Index, which tracks Chinese stocks trading in Hong Kong, surged 35% between September 11 and October 7. And the CSI 300 Index, which tracks Chinese stocks trading in Shanghai, jumped 33% over the same period.

But those gains have already been wiped away...

And the new U.S. president has a lot to do with that...

Like he did in his first term, Trump is readying more tariffs on China. This time around, Trump has threatened a 10% tariff on imports from China starting on February 1.

That's a lot lower than the 60% tariff he pledged while on the campaign trail, but it's still taking a toll on Chinese markets.

Chinese stocks, as measured by the two indexes mentioned above, are down more than 5% since Election Day – and down more than 10% from their October 7 highs. And the general uncertainty around China's economy and tariffs isn't going away anytime soon.

But it looks like China is going to continue to step in whenever it can to bolster confidence in its markets, whether through its own policies or demands placed on big market players.

This will have consequences, of course – like inflation. So China clearly isn't listening to Milei.

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New 52-week highs (as of 1/22/25): Agnico Eagle Mines (AEM), Amazon (AMZN), Antero Resources (AR), American Express (AXP), Alpha Architect 1-3 Month Box Fund (BOXX), Constellation Energy (CEG), Ciena (CIEN), Cisco Systems (CSCO), CyberArk Software (CYBR), Comfort Systems USA (FIX), Alphabet (GOOGL), HealthEquity (HQY), Intuitive Surgical (ISRG), Lumentum (LITE), London Stock Exchange Group (LNSTY), Markel (MKL), Neuberger Berman Next Generation Connectivity Fund (NBXG), Plains All American Pipeline (PAA), Invesco S&P 500 Equal Weight Technology Fund (RSPT), Vertiv (VRT), Vistra (VST), Westlake Chemical Partners (WLKP), and Zebra Technologies (ZBRA).

A quiet mailbag today... As always, send your thoughts and questions to feedback@stansberryresearch.com.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
January 23, 2025