Market Check: Why I’m Not Worried (Yet)

Shah Gilani|February 10, 2025

I know there’s a lot to worry about these days…

But things are better than they seem.

Amidst the chaotic news cycles of tariffs and inflation, there are some fantastic opportunities we can take advantage of… if we plan accordingly.

Over the weekend, President Trump announced immediate 25% tariffs on all steel and aluminum imports.

He’s also looking to add ‘reciprocal’ tariffs across the board on Tuesday.

That’s on top of the Consumer Price Index inflation data coming out Wednesday, the same day Powell testifies before Congress.

And let’s not forget the Producer Price Index inflation reading due out on Thursday.

This might seem like a lot to unpack.

But I’ve got a few ideas for you to turn these market movements into money makers.

Tune in for your Monday Takeaways. Don’t miss what’s moving your money… NOW.

Click on the thumbnail below to watch.

Transcript

Shah Gilani here with your Monday takeaways before the market opens.

We’ve got about half an hour before the market opens. Let me say this. Based on last week, the takeaway is…sloppiness.

This is the second week in a row the markets ended lower.

It doesn’t mean a whole lot though in the sense that while it’s nerve-wracking, we’re inches…a couple of percentage points away from all-time record highs for both the S&P and the Nasdaq composite.

So yeah, we’re within a stone’s throw of bull mode…actually, better said, we’re still in bull mode.

We haven’t even seen a 5% correction since early fall. So there’s really nothing to worry about.

What is worrisome – and I’m going to give you this again and again because it’s one of the things that bugs me – is the divergence in the Magnificent Seven.

You’ve got some real losers shaping up to be ugly that look like if they don’t consolidate and go higher, there are going to be some problems.

Everyone’s talking about the market broadening out, saying maybe the Magnificent Seven don’t matter anymore. Yes, they still matter because there’s a lot going on there.

What’s the takeaway from that? Here’s why some Magnificent Seven stocks are getting hit.

Number one, yes, there’s the theory they’re overspending on AI.

Number two, there’s the question about earnings impact based on the discounted cash flows model with interest rates higher for longer. The 10-year rate is already back to almost 4.5%.

And then there’s the aspect people aren’t paying attention to – there’s a twofold piece to this.

It’s about foreign exchange, about the strength of the dollar.

A lot of these mega-cap tech stocks get significant earnings from overseas. The dollar’s up about 7% on an index-weighted basis in the last year. That’s going to impact multinational earnings as they translate foreign earnings back to U.S. dollars. That’s a problem for some of these Magnificent Seven companies.

But the other side of that story is the Japanese yen starting to appreciate again. Japan is talking about raising rates further. This is like the selloff we saw last year based on the yen carry trade. If the yen continues to rise, if Japanese interest rates increase, that’s going to put more pressure on tech names.

Are we seeing a broadening out? No, I don’t see it. There are names getting picked up, but it’s mainly lifted by financials.

What’s the takeaway from all that? Yeah, hang in there. Nothing bad has happened.

Yes, we should be worried because this is different with some Magnificent Seven stocks coming apart. Can they get it together? We’ll find out soon enough.

What’s happening this week? We’ve got Chairman Powell speaking to Congress Tuesday and Wednesday. Going to be big news. He’ll likely talk about how the economy is doing well, inflation’s coming down, but they’re still on the case. He’s going to get questions about tariffs and their implications for inflation and interest rate policy. We’ve got to keep an eye on that because that could move the markets.

We’ve got other stuff this week – CPI on Wednesday, jobless claims and PPI on Thursday.

And last but not least, tariff talk, again. The President is saying he’s going to impose 25% tariffs on steel and aluminum imports.

Is that an opportunity too look at some stuff? Yeah. Look at stuff that’s moving.

Gold, for example, is making new highs – there’s an opportunity to watch gold. I don’t try to fade new highs or buy new lows. I want to see consolidation on the lows, see if they can turn around.

Because why would you fade a new high? If something’s moving higher, you want to go with it. I know a lot of you like to catch a falling knife or catch a turnaround on upside or downside. That’s a bit dangerous. I try not to buy new lows and sell new highs.

For those wondering what to look at this week – how about steel stocks?

Here’s Nucor, symbol NUE, my favorite steel company right now. I think it’s a value here. I like it better than U.S. Steel. If you want to play tariffs helping U.S. steelmakers, maybe look at tight play on Nucor.

Then there’s U.S. Steel, symbol X. Nippon Steel of Japan wants to buy it – about a $14 billion deal. President Trump has said no.

Now he’s equivocating, and he may allow it. It’s a tough situation – if U.S. Steel gets bought by a Japanese company, I’m not sure how that impacts the pro-America stance.

For aluminum, there’s Alcoa (AA). If we’re going to see some tariffs on aluminum, then Alcoa might get a pop.

Now Alcoa, the numbers, the balance sheet aren’t great.. But if you want to play a pop in aluminum prices, it’s the biggest U.S. aluminum company. Use a tight stop around $33.

Last but not least, there are ways to play the dollar. You’ve got the Invesco DB U.S. Dollar Index Bullish (UUP) if you’re bullish on the dollar. You can buy the ETF directly or some bullish call spreads. I’m bullish on the dollar. It’s been rising – not a bad trade. You’ve just got to make sure you have your profit targets and stops in.

And if you think we’re getting overdone, there’s UDN, the bearish dollar play. Consider some $17-18 call spreads.

That’s it for today. Futures are up. Let’s see if we can continue the good news and head back toward the old highs and break them. Be careful out there.