To The Moon

Hello, Tigers!

Starting Wednesday, the U.S. stock market will enter a dense earnings reporting season. Adding to this, next Monday marks Trump’s official inauguration date. How should we strategize this week?

Here’s an analysis of opportunities and risks to help shape your strategy:

I. Recent Opportunities

1. Bank Earnings Reports

The Q4 earnings season is kicking off, with major banks like Citigroup, Goldman Sachs, and Bank of America set to report results. TSMC will also release its earnings.

The performance of U.S. Banks are often a key focus at the start of each earnings season. This quarter’s reports may reveal insights into Wall Street banks’ recovery, profit growth, and other key trends.

Additionally, with Trump set to take office on January 20, 2025, banks could emerge as a major investment opportunity. Market expectations suggest Trump may roll back strict financial regulations, potentially boosting banks’ leverage, profitability, and dividend payouts.

2. TSMC Earnings Release

Taiwan Semiconductor Manufacturing Company (TSMC) is scheduled to announce its Q4 results on Thursday. Recent reports indicate TSMC’s revenue surged by 57.8% YoY in December 2024, driven by AI-related demand, reaching NT$278.16 billion. Bloomberg estimates Q4 revenue rose 39% YoY to NT$868.46 billion, beating forecasts of NT$854.7 billion.

SA author Hataf Capital notes TSMC’s dominant position in advanced semiconductor manufacturing, especially in leading-edge nodes (3nm, 5nm, 7nm), and its strategic expansion efforts, which have driven growth and profitability. Analysts believe that despite geopolitical risks and market cyclicality, TSMC’s initiatives and diversified income sources justify its strong "Buy" rating.

3. Opportunities in Gold

On Wednesday, gold prices dipped slightly as the market awaited CPI data. OANDA Senior Market Analyst Kelvin Wong noted, “If CPI data exceeds expectations, it could push gold prices lower, as this would reinforce the Fed’s likelihood of reversing last year’s dovish stance in 2025.”

Wong added, “If gold prices fall further, breaking November’s range and dropping below $2,600, the next critical level is around $2,540, which may present a compelling buying opportunity for long-term investors.”

A fund manager mentioned that while gold prices remain stagnant below $2,700 per ounce, 2025 is likely to bring bullish catalysts for gold.

II. Recent Risks

1. CPI Data and Inflation Concerns

The U.S. will release December CPI data at 9:30 p.m. Beijing time on Wednesday. Seasonal factors, such as high fuel costs and sticky food inflation, are expected to keep CPI elevated.

This data is crucial for investors and policymakers. Since the previous CPI report on December 11, inflation concerns have resurfaced, driving 10-year Treasury yields up by more than half a percentage point.

Forecasts suggest annual inflation will hit 2.9%, up from November’s 2.7%, while monthly inflation is expected to remain at 0.3%.

Bloomberg economists Anna Wong and Chris G. Collins stated on January 14: “If tariff uncertainty influences expectations, price increases may occur even before policy announcements. If the core goods inflation from November repeats, we’d be cautious about the prospects for further rate cuts.”

2. Tariff Speculation with Trump’s Inauguration

Reports suggest Trump’s economic team is considering a gradual tariff hike to boost negotiation leverage while avoiding inflation surges.

UBS economists caution that a gradual tariff increase could lead to supply shocks similar to the COVID-19 pandemic or Ukraine crisis, triggering higher inflation peaks. They warn that such a scenario would complicate the Fed’s policy response.

3. Nvidia’s CoWoS-S Demand Concerns

Renowned analyst Ming-Chi Kuo reported that Nvidia is redefining its product lineup with its latest Blackwell architecture.

The new roadmap indicates that Nvidia is focusing on CoWoS-L for mainstream solutions. Recent market rumors about Nvidia cutting CoWoS-S capacity align with this shift. However, the reduction is attributed to roadmap changes rather than declining demand.

III. This Week’s Allocation Strategy

Allocation Logic:

The Nasdaq has pulled back nearly 4.5% from its recent high, while the S&P 500 is down about 4%. CNN’s Fear Index suggests market sentiment has entered the fear zone.

With CPI data, earnings season, and Trump’s inauguration creating uncertainty, the market is expected to remain highly volatile.

It’s unclear if the current correction is a “healthy pullback in a bull market” or a “true correction.” If it’s the former, a pullback to the 200-day moving average could present a buying opportunity. If it’s the latter, further declines may follow.

While we remain optimistic about tech stocks this year, blindly bottom-fishing this week could lead to significant portfolio volatility. From a balanced approach, it’s prudent to reduce exposure to tech stocks and focus on financials, gold, and other defensive assets.

Key Defensive Assets: