Tariff Beast Tamed? Palantir Still Champion, U.S. Sovereign Wealth Fund

All it took was one weekend. Suddenly, the "Great North American Trade War of 2025" had evolved into the "Fairly Minor Trade Skirmish of the First Couple of Days of February." 

Financial markets stumbled out of the gate Monday, with stocks suffering deep early declines as it had appeared to all that a potentially long trade war had begun between the U.S. and its neighbors. Then, the sun came out from behind the clouds and that early beat-down started to look less severe.

On Saturday, the Trump administration had implemented 25% tariffs on goods coming in from both Canada and Mexico (just 10% on Canadian energy). By Monday, after conversations with the president, Both Mexico and Canada had agreed to aid the U.S. in protecting both the northern and southern borders from the crossing of illegal drugs and humans onto U.S. soil, allowing these tariffs to be postponed for at least a month in order to make sure that promises are kept, and a new ultimate trade deal can be reached.

Mexico's President Claudia Sheinbaum agreed to deploy 10,000 troops to her nation's northern border to deter the flow of fentanyl and migrants across the border. President Trump agreed to have U.S. forces work to slow the flow of U.S. weapons going the other way. Both nations will have delegations meeting to work together towards reaching a more permanent agreement during the month-long pause. The U.S. side will be led by Secretary of State Marco Rubio.

Canada's Prime Minister (didn't he resign?) Justin Trudeau also agreed to deploy "nearly" 10,000 troops to his nation's southern border and reinforce those troops with new helicopters and technology, while coordinating efforts with U.S. forces to stop the flow of fentanyl into the U.S.

And just like that, investors gasped a sigh of relief, stock prices came well off of their lows, as did Bitcoin, while the U.S. dollar and WTI Crude both came off of their highs. 

Just two questions. Is it okay to get back in the water? Who's that guy with the hockey mask?

Jason?

So, you thought that the tariff beast had been put down? Not so fast, my friends. 

Readers probably noticed the short-lived overnight rally in U.S. equity index futures on Monday evening after the two preliminary, but relatively easy wins for the Trump administration in our own hemisphere. Then, the Panamanian government not only offered free passage for the U.S. Navy through the Panama Canal but pledged not to renew its membership in China's Belt and Road initiative and to review the lease agreements of the two Chinese-owned terminals on either side of the canal.

That's three wins in the Western Hemisphere. But with that last one, along with the additional 10% tariffs that the Trump administration had placed on Chinese imports, the Chinese government responded. Hence, I am sure you've seen that futures are no longer in rally mode. The mainland Chinese government in Beijing announced overnight that its Finance Ministry would impose a 15% tariff on U.S. coal and liquified natural gas. Tariffs of 10% would also be placed on U.S. crude, agricultural machinery and some vehicles.

Are the U.S. tariffs on Chinese goods, or the Chinese tariffs on U.S. goods steep enough to force a panicked response and a quick, if tentative resolution as had been the case with our North American neighbors? Probably not. 

The U.S. could have put the Canadian and/or Mexican economies into a state of recession with those tariffs. The Chinese economy, though struggling, probably is not quite so fragile. This portion of the trade skirmish could go on for a bit.

How About This?

On Monday, President Trump ordered the Treasury and Commerce Departments to create a U.S. sovereign wealth fund. There are 90 state-owned sovereign wealth funds on Planet Earth managing an aggregate $8 trillion or so on behalf of national and sub-national governments, according to the International Forum of Sovereign Wealth Funds (which I read about at the Barron's website).

The U.S. has never had one of these before, and quite honestly, I am not quite sure how I feel about this. While, on the surface, this seems like a good idea, as the U.S. runs deep fiscal deficits and any way to raise funds might help, just how will the fund be financed? There is no budget surplus out of which a slush fund could be created. How will it operate? If taxpayers are put at risk, there will surely have to be guidelines that will have to be followed.

Lastly, once invested, does this put the U.S. government in the awkward position of having rooting interests within our financial marketplace? That could lead down the road to potentially choosing favorites. Color me undecided on this one.

Was Monday a 'Day One'?

At a glance, it sure looks like it. In fact, at a glance, Friday looked like a "day one." 

The fact is that despite the fall in share prices and the setup for this morning for a potential third day of declines, we don't have a true "day one" bearish reversal. Can there be a change in trend without a "day one" and a "confirmation day"? Yes, there can. I prefer to have these items in my utility belt as I proceed through the marketplace, but nothing is required for anything. That's how surprises and inefficiencies happen.

Even with the rally off of the lows, Monday was sloppy for U.S. equities. Five S&P sector SPDRs closed in the green, with Energy XLE in the lead at +0.63%. Six of these funds closed in the red, with two of them surrendering more than 1.3%. Those two were Tech XLK and the Discretionaries XLY. 

All of our mid-major to major equity indexes closed down on the day, with the Dow Transports and the Philly Semiconductors taking the most heat at -2.33% and -1.82%, respectively. The Nasdaq Composite gave back 1.2% as the S&P 500 gave up 0.76%.

Breadth was lousy. Losers beat winners at the NYSE by roughly 13 to 6 and at the Nasdaq by about 10 to 4. Advancing volume took just a minority share of activity for listings at both the NYSE and the Nasdaq, and that makes Monday very close to a "day one." However, trading volume was down on a day-over-day basis for NYSE listings. 

I know making volume-based calls is difficult in this era were more than half of the action takes place in the dark (which should be illegal and railed against by institutions with an ounce of moral fiber), but I still hesitated to make that call without the increased trading volume to back it up.

Still Champion!

All hail, the mightiest of the all, Palantir Technologies PLTR. After the closing bell on Monday, Palantir beat expectations for both adjusted EPS and revenue generated quite decisively. The company also provided guidance that was well above consensus and the shares took off overnight. 

For those readers who have been with this one since the days of "Stocks Under $10," at these overnight prices, you are sitting on what is now just about a 17-bagger. Yes, this stock has been the greatest call and perhaps the greatest investment of my long career. 

I will have to devote an entire piece to these earnings as there is not enough space in this column. Rock and freakin' roll!!

Economics (All Times Eastern)

08:55 - Redbook (Weekly): Last 4.9% y/y.

10:00 - Factory Orders (Dec): Expecting -0.9% m/m, Last -0.4% m/m.

10:00 - JOLTs Job Openings (Dec): Last 8.098M.

10:00 - JOLTs Job Quits (Dec): Last 3.065M.

16:30 - API Oil Inventories (Weekly): Last +2.86M.

The Fed (All Times Eastern)

10:00 - Speaker: Atlanta Fed Pres. Raphael Bostic.

14:00 - Speaker: San Francisco Fed Pres. Mary Daly.

19:30 - Speaker: Federal Reserve Vice Chair Philip Jefferson.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: ADM (1.15), CMI (4.68), EL (0.32), MRK (1.68), PYPL (1.12), PEP (1.94), PFE (0.46), SPOT (2.00).

After the Close: AMD (1.09), GOOGL (2.13), AMGN (5.08), CMG (0.25), EA (3.08), MTCH (0.83), SPG (3.42), SNAP (0.14).

At the time of publication, Guilfoyle was long AMD and PLTR equity.