As we come to the end of the first month of 2025, what is happening around the world is stunning.

Did AI Bubble Just Pop?
January 28 (King World News) –
Peter Boockvar:  Did DeepSeek just ring the bell on the extraordinary multi year dominance of the AI tech trade and finally call into question the efficacy of the hundreds of billions being spent on building out Gen AI? Yea, most likely. But there are two other things to think about too. Firstly, one of my big worries over the past few years has been the unintended consequences of the US government’s/China hawks attempts to limit China access to parts of US technology (mostly chips and chip equipment) in our desire to suppress their advancement and avoid too their military from using it.

That it would just poke the bear and dramatically incentivize China from eventually developing their own technology/chip/software base, along with still getting access to US tech/chips, that would at some point make them independent of us. And where US technology companies would not just lose the 2nd biggest economy in the world as a customer but China would eventually be a huge competitor to them in the years/decades to come globally.

Secondly, just maybe the stock market will shift its attention to the inevitable and sustainable beneficiaries of GenAI and that are the companies using it to enhance their efficiencies and productivities of their business and not the ones spending many billions on developing an incredible tool but one that is becoming commoditized.

China stocks are the ones rallying today by the way.

Public Going All-In On Stocks
This selloff too in the market comes as at least measured by the Citi Panic/Euphoria index, market participants are the most Euphoric in years. Note the chart too below from Barron’s calculating the level of insider selling. Over the past few months we’ve seen three jumps in readings with the most recent one being the most pronounced. Take note.

Investor Sentiment At One Of The Most Euphoric Readings In History!

Corporate Insiders Are Selling Into The Public’s Euphoria

The state sector focused manufacturing and non-manufacturing PMI in China for January fell to 50.1 from 52.2 with both sides falling m/o/m. Manufacturing slipped one pt to back under 50 at 49.1 while ex-manufacturing dropped 2 pts to 50.2. As said here many times, the downturn in housing is the biggest strain on the Chinese economy right now and when their home prices stop going down (which we’ve seen some signs in their top tier cities), a bottom will be in the China growth rate.

Germany Continues To Struggle
The main thing of note in Europe was the January IFO German business confidence index which did lift to 85.1 from 84.7, the lowest since the 2020 Covid shutdowns and above the estimate of 84.8. The Current Assessment rose 1 pt while Expectations fell a touch to 84.2. In their succinct way, IFO said “Companies continue to be pessimistic.” Manufacturing remains their main pain point, along with global trade.

To a few earnings calls of note.

The Wealthy Keep Spending
From American Express:

“we exited the year with increased momentum as fourth quarter billings growth accelerated to 8% overall, driven by robust holiday spend.”

“Our US small and medium sized enterprise customer base continue to grow, with strong new card acquisitions throughout the year. And we saw an improvement in small business sentiment in the fourth quarter, which linked to stronger organic spending by our small business customers through the holiday season.”

“We saw a stable spending environment for most of 2024 with an acceleration in spending as we exited the year. We continued to see healthy loan growth, and we achieved record net card fees…The increasing growth was broad based across both T&E (travel and entertainment) and goods and services categories, across geographies and across every customer segment.”

Travel Spend Is Booming
Specifically, “Travel was higher this particular quarter, and particularly airline. Airline doubled sequentially q/o/q, up 13%. The more surprising number, I think, was front of the cabin, up 19%. And restaurant continues to be strong.”

We know Amex caters to the higher income consumer which we know is carrying the US economy on its shoulders, along with AI spend, which will now be in question, and anything living off US government largess, both at the federal and state levels.

Luxury Still Seeing Significant Spend
From Burberry:

“While comparable store sales were down 4% vs last year, we saw a sequential improvement in all regions as compared with the 2nd quarter. We’ve taken swift action in the quarter to address our inventory levels through enhanced end-of-season activity and this modestly benefited our Q3 comparable sales by a low single digit percentage.”

“Globally, the Chinese customer group was flat vs last year, continuing to outperform Mainland China. Chinese spending abroad was mostly in Japan, South Asia Pacific, and Continental Europe. Japan grew 4% in the quarter, boosted by tourism spend from Chinese customers…The EMEA customer group was flat y/o/y, driven by an improvement in Continental Europeans shopping globally. Americas were up 4%.”

Gold Attacking All-Time High!
To listen to Alasdair Macleod discuss gold attacking all-time highs as well as what to expect from silver and mining stocks CLICK HERE OR ON THE IMAGE BELOW.

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