Come gather round people where ever you roam

As the week started, the focus was on what the Fed would do, how Powell would handle his first press conference with a new incumbent in the White House and one not averse to offering his views on any subject, giving instant feedback. I bet Mr Powell will remain diplomatic tonight regarding the outlook for interest rate policy for the coming year. Why pick a fight in the first week? The ECB on Thursday was likewise a focus of attention, but in reality, there is little doubt that the ECB will cut by 25 basis points on Thursday. Earnings season was now in full swing as 5 of the Mag 7 are due to report this week, which could yet ruffle a few feathers, Microsoft tonight. What few were talking about was an obscure Chinese hedge fund turned AI startup with its latest large language model, R1., a company few had ever heard of a few weeks ago, sent shock waves through the technology sector.

DeepSeek has taken the world by storm as the model appears more efficient and can achieve the same results for a fraction of the energy use, a competitor to ChatGPT. On Monday, over a trillion dollars was wiped from the value of the technology sector. Nvidia shareholders had a sudden reality check, as concerns are now raised that DeepSeek’s new AI model can apparently run on less-advanced chips and will challenge the dominance of high-cost chipmakers like Nvidia. There was a massive rotation out of tech into healthcare and consumer discretionary sectors. Semiconductor stocks were particularly hard hit.

Has the news finally burst what many consider to be the second technology bubble since the early 2000s? Quite possibly. It may also remind us of the worth of the active manager. We have read a lot recently about the death of the active manager as funds have flown into ETFs. What do I need an active manager for? I can buy an ETF and enjoy the ride. The question is what to do when the picture looks less certain; it is at these times when an active manager should earn his gravy. He can spot the shift in trends, be nimble, look to sectors that were deeply out of favour, and sense the mood change.

Last night, the US tech market recovered some of the previous day’s losses. We shall see how things settle in the coming days. This news will shake confidence in the belief that the technology sector is a one-way bet. Quite often, as my father says, one looks back and reflects on the moment things changed for the market. Monday may have been that moment, we shall see.

I saw the Bob Dylan movie last night, and it’s a must-see. Timothy Chalamet is brilliant as Bob Dylan, and Edward Norton is equally as good playing folk singer Pete Seeger. You don’t learn much about Bob’s upbringing and early life, but you learn an awful lot about him and his music.