Shesa's FEBRUARY 2025 Investment Blog

U.S. Stock Market Update 

The U.S. stock market is entered 2025 with cautious optimism after a robust performance in 2024. But in contrary, U.S stock market did quite well in January, S&P 500 was up 3.94%, Dow Jones soared 5.5% and Nasdaq was up 3.14%. On Monday, January 27 AI stocks had their worst day in recent memory after a new Chinese AI model after DeepSeek (a Chinese version of ChatGPT) said  that its model is as good but cost 95% less to develop. This news sparked fears that companies may not need to spend as much on creating new AI models as previously thought. Nvidia lost $589 billion on a single day biggest loss by any stock on a single day in the stock market history. NVDA and AVGO combined lost $800B on a single day. More on this later in my blog. There has been a lot of geopolitical drama in the last few weeks, threats of a trade war, to the DeepSeek drama, DOGE shutting down some departments and bringing potential corruptions to the forefront and saving money for American Tax Prayers. 

The Q4 earnings are in full swing. A majority of 77% of S&P 500 companies have reported earnings. Most of the tech giants have released their earnings. They did well but the guidance was not as Wall Street expected. In my view META and Netflix earnings were the best of the lot. We are in the AI revolution, the investment by big tech companies does not seem to be abated. Amazon plans to invest $105B this year, Microsoft $80B, Google: $75B, META: $65B in AI. In simple, what it means is they are seeing incredible opportunities. But huge earnings still remain, that’s NVDA which is expected to release earnings on February 26. 

Economy: All the economic news in last few weeks have not been market friendly. The CPI went up to 3%, PPI went up to 3.6%. Retail Sales crashed -09%. With that said, the stock market could still manage to go up because of better earnings. Please note that,  the real-time measures of February inflation -or- the U.S. Truflation Inflation Index is falling which is a very welcome news. It has collapsed from 2.7% at the end of January to just above 2% as of last week, the biggest monthly collapse of the past year. That is very bullish for stocks. 

Trump policies: With Donald Trump returning to the White House, his policies are expected to lean towards deregulation, tax cuts, spending cuts through DOGE and a hard stance on trade with increased tariffs, deportation on illegal immigrants etc. The proposed tariff particularly on imports from China, Canada, and Mexico could become inflationary and reduce GDP growth. More on this later..

Federal Reserve Actions: The Federal Reserve has indicated a cautious approach to rate cuts in 2025, aiming to manage inflation which is above the target but showing signs of stabilization. Analysts expect rates to decrease modestly, perhaps settling in a 3.5-4% range for the federal funds rate, which could support economic activity but at a slower pace than anticipated.

Finally, we saw two consecutive years (2023, 2024) of solid stock market gain. So, the most important question is, what is in the store for stock market in 2025? Can we see another good year for the stock market? Or we have to brace for the downfall? Well, I will share my thoughts but before that let’s take a glance at the stock market index.

Indexes	Close TUE 12/30/24	Close TUE 2/7/25	Change in 2025	% Change in 2025	All Time High	From All Time High	% from All Time High
DOW	42,544.22	44,546.08	2,001.86	4.71	45,073.63	-527.55	-1.17%
S&P 500	5,881.63	6,114.63	233.00	3.96	6,099.97	14.66	0.24%
NASDAQ	19310.79	20,026.77	715.98	3.71	20,204.58	-177.81	-0.88%
Russel 2000	2,230.16	2,279.98	49.82	2.23	2,466.49	-186.51	-7.56%
SOX (Semi)	4,979.93	5,160.94	181.01	3.63	5,931.83	-770.89	-13.00%

Economy News

• Interest Rate: 4.5% 
• GDP Annual GDP: 2.5%. Dec: 2.3%
• Inflation: 3%, previous: 2.9%; PPI: 3.6% vs. 3.3%
• NonFarm Payroll: 143K vs. 175K. Unemployment: 4.0% vs. 4.1%
• Retail Sales: down -0.9% vs. -0.3% expected
• Earnings Growth: Q424: 10.7%, Q1FY25: 12%, Q2: 12%, Q3: 13.4%, FY25: 14.8%. Rev: 5.9%.
• PCE: 2.6% (Dec) vs. 2.4% Nov
• Consumer Confidence Index: 67.8 (Feb) vs. 71.1.
• Key Report next week: CPI: 2/12, PPI (2/13), Retail Sales (2/14).
• US Mortgage Rate: The 30-year fixed around 7.5

Q4FY 2024 Earnings

• Currently, 77% of S&P 500 companies have reported earnings, 76% of S&P 500 companies have reported a positive EPS surprise and and 62% of companies have reported a positive revenue surprise.
• Earnings Growth: For Q4 2024, the blended (year-over-year) earnings growth rate for the S&P 500 is 16.9%. If 16.9% is the actual growth rate for the quarter, it will mark the highest year-over-year earnings growth since Q4 2021.

Why Market got panicked by DeepSeek?

The Chinese company released a new AI model that could potentially represent a disruptive paradigm shift in foundational AI models. Nvidia lost $589 billion on a single day biggest loss by any stock on a single day in the history. This took the whole AI chip and energy related companies down significantly. Most investors thought the AI bubble was bursting. But subsequently, Wall Street realized that the AI model training and inference costs should go down, more companies and people will build AI models, which would need more AI chips more AI compute, more AI energy and overall higher AI spending. Also, as I wrote in my WhatsApp group, the AI appliers like CRM, META, SNOW etc. can develop more models and lesser training cost for large scale AI deployment. This democratization of AI should help companies to innovate more rapidly building upon existing work rather than starting from scratch. So, I believe these companies should be the major beneficiaries. On the AI side, please note that Elon Musk’s AI - Grok3 is getting released TODAY through a live demo at 8pm PST. I have used so many AI tools ChatGPT, MS Copilot, Meta AI, Gemini etc. but I personally found Grok is the best for my personal use. I guess this should be one of the best for time to come.

Why Trade war will not be good for Economy and Stock Market

Based on Fed research, each percentage point increase in the average U.S tariff rate would coincide with a 0.15% decrease in GDP growth and a 0.1% increase in the core PCE inflation rate. Based on that, if the newly-announced Trump tariffs is implemented (Mexico 25%, Canada 25%, China 10%) then it would increase the average tariff rate by 8%, slow GDP by 1.2%, and boost core PCE by 0.8%. At those rates, we would be looking mere 1% GDP growth and bump core inflation beyond 3%. If inflation goes up, interest rate cut may be history and Wall Street may start talking about re-inflation and rate increase etc. When GDP growth is slow and inflation is high, the stock market doesn’t normally go up. Historically, when GDP growth runs between 0% and 1.5% and when core inflation is running above 3% similar to the the above situation, if tariffs are implemented, the stock market has only risen in 44% of quarters with an average quarterly negative return of -2%. Hence, a trade war is expected to negatively impact the stock market. Apparently, that would not be a good news for economy and correspondingly for the stock market as current market valuations are so high. 

But on the positive note, it gives bargaining power to the current administration.  More importantly, there may be flood of manufacturing shift to U.S. The Trump Tax cut and Tariff imposed on other countries products will motivate more manufacturing shift to U.S from abroad. Because U.S. is the biggest market and no country would like not to do business with it. If that happens, it may accelerate the GDP growth to 4-5%.

The January Barometer

January is one of the most critical month as it defines how the year would progress. So, let’s take a look.

• If the S&P 500, ends January on a positive note, the rest of the year tends to be positive. S&P 500 was up 3.94% in January
• When January closes green, the S&P 500 ends the year positive about 81% of the time, if January closes Red then year is positive only 46% of the time
• When the S&P 500 made a new high in January, the full year was higher 79% of the time with an average return of 11.7% vs. 9.5%
• In the first year of a presidential cycle, if January is positive, the S&P 500 has historically gone up by an average of 18.3% and was up 91% of the time
• If history is any evidence, we should see a good stock market performance in 2025 based on all the above metrics. But history is past, and future is uncertain!!

Trump Tax Cut priorities

• No Tax on tips, Overtime
• No Tax on senior Social Security 
• Renewing 2017 middle class tax cuts: possible increase of standard deduction or tax rate reduction
• Adjusting the state and local tax deduction (SALT): It was incorporated in 2017 in Trump’s first term. This may provide relief for states like California, New York, New Jersey etc.
• Eliminate all special tax breaks for billionaire sports team owners
• Close the carried interest tax deduction loophole
• Tax cuts for Made in America products planned to be reduced to 15%. If it’s not manufactured in India then it would remain 21%

Trump Policies Impact?

• Positives
• Tax Cuts: Trump plans to cut the corporate Tax to 15% for companies manufacture in U.S otherwise Tax rate remains at 21%
• Deregulations: Reducing unnecessary rules and regulation will facilitate easy for business to operate and also reducing abundant administrative time and cost. The administration's focus on reducing regulations might particularly benefit sectors like energy, finance, and small businesses.
• Mergers & Accusations: One of the worst nightmare during Biden administration was that they made life miserable for the corporate world on mergers and acquisitions. We can expect the M&A could double in 2025.
• DOGE: The newly formed Department of Government Efficiency lead by Elon Musk are expected to reduce government spending and increase government savings. The department of government efficiency (DOGE), headed by Elon Musk is doing a spectacular job by identifying the waste, inefficiency, redundant and unidentifiable spendings. Based on X, just to give an example, the CBO reveled that $516B was spent in 2024 with expired authorizations and some dating back 40 years!! 
• Political stability: Trump 2.0 is anticipated to bring more political stability, hence  more investors confidence in the stock market unless cracks appear within republican party. As we know market likes certainty/stability.
• Wars may stop: Russia/Ukraine, Israel/Lebanon wars are expected to come to an end during Trump. If so, it should be helpful for economy due to reduced debt
• Better Earnings, Revenue and GDP in 2025: Analysts are expecting about 15% earnings, 5.8% Rev growth and about 3% GDP growth for 2025.
• Manufacturing shift to U.S: The Trump Tax cut and Tariff imposed on other countries product will motivate more manufacturing shift to U.S from abroad and if so, it may accelerate the GDP growth to 4-5%.
• Negatives
• Tariff: Since Trump administration may impose tariff not only on China but also many other countries. Hence, the cost of goods may increase, particularly agricultural and industrial products and possibly higher inflation. 
• Tax Cut may increase inflation due to higher liquidity 
• Eradication of illegal immigrants may increase labor cost and thus inflation: pls note, in 2023 alone, illegal immigration cost U.S. taxpayers $150.7B (size of Ukraine’s economy).
• Less Rate Cuts: Fed may not cut rates as anticipated, if there will be re-inflation and that may not good for the economy and stock market as a whole.

Which Stocks should do Well this year?

• Tech Stocks: Despite the DeepSeek news and some pullback, tech stocks, especially those involved in AI, cybersecurity, and cloud computing, are expected to continue performing well due to ongoing digital transformation trends. I also like the future technology “Quantum Computing” stocks. One of them I have included in my blog portfolio this month. 
• Small and Mid-Caps: These might see a rally if there is lower interest rates which I  am not very optimistic. However, deregulation, and potential M&A activities spurred by the new administration's policies.
• Financials: Due to de-regulation, financial stocks could potentially be big winners
• Energy and Industrials: Likely beneficiaries of deregulation, potential infrastructure projects, and tax policies favoring domestic production.
• Non-tech sectors: Consumer staples, utilities for their dividends, and industrials for potential infrastructure spending could be wise.

My Strategy for 2025

First of all, I do NOT know the future but I can just share my view. Secondly, these days market changes very fast, so these strategies may change depending on the market situation. 

• It’s better to remain invested as market should continue to rise as we are still in a BULL market. I feel this year should be another good year of the stock market unless there is any major unknown or catastrophic events takes place. But why to worry too much about the unknowns, rather take the opportunity to invest and get better ROI.
• We may continue to see lots of volatility and pullbacks, so buy on dips. Buy strong stocks. Stay the course with the bull market. Trim on the up.
• Always have some CASH on the sidelines to take advantage of such volatility. Always remember to keep emotions under control (Greed & Fear) drive Wall Street. Panic is never a strategy. Don’t be over confident!
• Long term investment is good strategy, but a Core vs. Trading Portfolio for better ROI - reinvest profit on stock with better potential. Long term investors may feel the pinch!
• Let’s NOT forget to hedge/insure our portfolio a little bit for the pullback or any scary move down
• If situation changes, we MUST be able to quickly re-adjust our portfolio and change strategy. Not to keep holding losers and getting emotional
• Remember we can’t win on everything, but majority of gain comes from a handful of stocks. The question is when you lose, the worst is 0, but when you WIN how big is the win!!
• We may do everything right but still lose money because of non-controllable viz. war, unknown events, Bad earnings in the sector etc. So, don’t get too emotional..

Some Growth stocks to watch for 2025

If you missed my January blog then I am re-publishing my list of stocks that I like for 2025.

• Broadcom (AVGO)
• Tesla (TSLA)
• Nvidia (NVDA)
• Salesforce (CRM)
• Facebook (META)
• SuperMicro (SMCI)
• Snowflake (SNOW)
• Coinbase (COIN)
• MongoDB (MDB)
• Destiny Tech 100 (DXYZ)
• Zillow (Z)
• Redfin (RDFN)
• MicroSector Fang (FNGU)

Some of the Small Cap stocks that I am really looking into are indicated below. Many of these may have huge potential, These stocks have performed exceptionally well last year, but corrected little bit this year. However, I continue to believe they should do well. Please note that, these small growth stock are extremely volatile. Hence, any investor who can’t take volatility must stay away. Here is the list of my preferred small cap stocks:

• IONQ Inc (IONQ): => Included in this month’s. Blog portfolio.
• SoundHound (SOUN)
• Rigetti Computing (RGTI)
• Recursion Pharmaceutical (RXRX) => Included in my JAN 2025 Blog portfolio.
• Aurora Innovation (AUR)
• Adaptive BioTech (ADPT)

Below small cap stocks did not do well in 2024 but I see huge potential if they succeed. More importantly  I like these stocks because they are trading at a very reasonable price:

• Enovix (ENVX): Company is expected to release its earnings on this Wednesday, 2/19.
• QuantumScape (QS): Planned to go mass production later this year.

S&P 500 Earnings projections for 2024-2025

Q4 2024: 16.9%, revenue growth of 5.9% last week

Q1 2025 (projected): 12.7%, revenue growth of 5.3%

Q2 2025 (projected): 11.9%, revenue growth of 5.5%

FY 2024 (projected): earnings 9.4%, Revenue growth: 5.1%

FY 2025 (projected): earnings 14.8%, Revenue growth: 5.7%

Valuation: The forward 12-month P/E ratio for the S&P 500 is 22.2. This P/E ratio is above the 5-year average of 19.6, and above the 10-year average 18.1.

Stock Market TOP sectors for 2025

Sector	YTD Performance in %age
Communication Services (TOP)	8.78
Financials	6.96
Materials	6.76
Consumer Staples	5.25
Healthcare	1.13
Industrials	4.31
Information Technology	1.55

Please note that none of the sector is red Year to Date. You can click below link to view complete sectorial performances:

https://www.barchart.com/stocks/sectors/rankings?timeFrame=Ytd

Source: barchart.com

Now let me discuss this month’s stock picks for my Blog Portfolio on this emerging Quantum Computing stock.

IonQ, Inc. (IONQ)

IonQ is a leader in the quantum computing engages in the development of quantum computing systems in the U.S. Its systems are aimed at solving the world's largest and most complex commercial and research use cases. The company makes access to its quantum computers through cloud platforms, such as Amazon Web Services (AWS), Microsoft's Azure Quantum, and Google's Cloud Marketplace, as well as through its own cloud services. It also provides contracts associated with the design, development, and construction of specialized quantum computing hardware systems; maintenance and support services; and consulting services. The company was founded in 2015, Maryland, USA. 

What is Quantum Computing? Before we buy the stock it’s better that we understand about it. Quantum computing is a type of computing that leverages the principles of quantum mechanics to solve complex problems at lightening faster speed traditional computers by utilizing quantum bits (qubits) which can exist in multiple states (0 & 1) simultaneously, allowing for parallel calculations at an astronomical speed.

Why do I look IonQ? 

In the rapidly evolving world of technology, IonQ stands out as a leader, particularly within the niche and transformative field of quantum computing. If we look at the current position and future prospects, it's clear why this company has captured the attention of investors and tech enthusiasts alike. The company has also secured strategic partnerships with many reputed companies like Nvidia, Hyundai Motor Company, General Dynamics Information Technology, Ansys, NKT Photonics to name a few. Additionally, IonQ's involvement with the President’s Council of Advisors on Science and Technology (PCAST) underscores its significance in shaping U.S. tech competitiveness. IONQ was first Quantum Computing company to go public on October 1, 2021.

Innovation: IonQ’s technological prowess is evident in its development of quantum systems like IonQ Forte, boasting 36 algorithmic qubits, and the upcoming IonQ Tempo, anticipated to feature 64 qubits this year. These advancements are not just about increasing the number of qubits but enhancing crucial for practical quantum computing applications. IonQ is at the heart of quantum computing innovation, promising to revolutionize how we solve complex problems in various industries from pharmaceuticals to finance and many more. Microsoft, Amazon, and Google that offer cloud access to IonQ's technology to access its quantum computing capabilities through cloud platforms, particularly for research and development purposes in areas like drug discovery, materials science, and financial modeling. This company is the leader in the exclusive group of small quantum computing companies. Please note IBM, Google etc. are also actively involved but these large scale companies primary business in not QC.

My View: In early September the stock was trading at around $7 and went as high as $54.74 in early January this year. The stock was on total fire. I bought this stock probably a couple of years ago around $6-7. But this year, the company's journey in 2025 has been marked by both recognition and volatility. In 2025, the stock has returned -10.3% year-to-date. The stock is currently trading at $37.46, about 32% lower than its 52-weeks high. The stock seems to be stabilizing and possible accumulation by institutional investors. At the current price, it looks like a good opportunity for the long-term investors. On the Fundamental side, the company had 102% revenue growth year-over-year. As this is a growing young company there is not much fundamentals to talk about. Though the stock has come down this year, this company got accolades, IonQ was named one of "America's Most Successful Mid-Cap Companies" by Forbes for its commitment to innovation and growth within the quantum computing sector.

Strategy: As I said the stock is down about 32% from it’s 52-weeks high, I use such opportunity to accumulate or add to my portfolio position. As a strategy, I don’t buy any stock at once because nobody can predict the top or bottom of a stock. Particularly, small growth companies stocks are extremely volatile. Hence, my strategy is to keep accumulating in small quantities and build the portfolio for longterm patiently. And when there is bump, it’s extremely important to take some chips out of the table to book some profits and mitigate risks. I have done the same for IONQ by adding or trimming depending on share price movement. The whole process needs some strategy, patience and discipline.

Risks: Quantum computing is still considered an emerging technology, so many businesses are currently exploring its potential rather than fully integrating it into their operations. However, as with all speculative investments, a cautious approach is advised. The path to practical, commercial quantum computing still has challenges, but IonQ's advancements signal that we might be closer than ever to unlocking quantum's full potential. It’s a growth company with significant potential. However, those who can’t take volatility should avoid this stock.

My final thoughts

For investors and tech enthusiasts, IonQ represents not just a stock but a stake in the future of computation. While short-term volatility exists, the long-term potential of quantum computing could make IonQ a significant player in the tech investment space. IonQ embodies the potential of quantum computing to leapfrog current technological limitations. And as the company grows, so also its stock price and patient long term investors can be hugely rewarded. I am a growth investor and look promising companies to invest for long term. So, it perfectly fits my bill and hence I am invested and keep accumulating this stock for long run. I will trim as needed.

Shesa’s Blog Portfolio (As of FEB 17, 2025 - Updated on 4/6/25)

Equity	Suggested Price	Current Price	Suggested Date	% Change	My View  (see disclaimer)
STOCK (All prices are in USD)
AAPL	12.9	244.6	1/25/13	1796%	HOLD
META	47	736.67	11/13/13	1467%	Buy on dip
MA	77.18	564.76	12/12/13	632%	HOLD
AMZN	15.58	228.68	4/12/14	1368%	Buy on dip
SHOP	13.48	128.35	11/25/18	852%	HOLD
SPG	54.59	185.05	5/25/20	239%	HOLD
NVDA	23.9	138.85	2/13/22	481%	Buy on dip
TSLA	290.25	355.84	5/1/22	23%	Accumulate - Long Term
RDFN	8.87	8.87	4/6/23	0%	Accumulate - Long Term
SOXL	15.66	28.55	4/6/23	82%	HOLD
GOOG	123.25	186.87	5/21/23	52%	HOLD
PLTR	20.49	119.16	11/19/23	482%	HOLD
MSFT	376.04	408.43	1/1/24	9%	SOLD
PANW	142.06	200.03	3/31/24	41%	Buy
SMCI	85.74	47.91	4/28/24	-44%	Accumulate - Long Term
ENVX	10.48	11.45	4/28/24	9%	Accumulate - Long Term
DELL	138.96	114.38	7/6/24	-18%	SOLD
Z	51.92	79.97	8/11/24	54%	Buy - Long term
CRM	254.57	326.54	9/14/24	28%	SOLD on 4/4/25.
LRCX	76.16	82.75	11/11/24	9%	Buy on dip
RXRX	6.76	10.53	1/2/25	56%	Accumulate - Long Term
IONQ	37.46	37.46	2/18/25	0%	NEW ADDITION
	ETF
IHF	27.82	52.17	8/16/15	88%	HOLD
MUTUAL FUND
PRMTX	59.45	170.48	12/20/14	187%	HOLD
FSRPX	9.05	21.65	1/15/16	139%	HOLD
FSMEX	43.66	6543	9/24/17	14886%	HOLD

A few Key Economic report this week (2/17 - 2/24)

Nothing very critical except Existing Home Sales

Equity Sold since my Last Blog

Fluency Energy (FLNC)

Here is my YouTube channel link:  https://www.youtube.com/channel/UCt7oLVUMG3NkJUzAVUzl4Tg

Disclaimer: This blog is meant to provide my opinion only. The information provided is to the best of my knowledge but may not be accurate. I do NOT provide any professional recommendation to buy/sell any stock, ETF, mutual fund, or any other security(s). As an investor, it’s your hard-earned money and you decide what is best for you. The above are merely my own opinions on what I do. Please contact a professional money manager to buy/sell any security. I do not charge any fees or commission by writing the blog except anything from Google AdSense. I have position(s) on whatever security I put on my blog portfolio and avoid including any security that I do not own or follow. Anyone buying or selling the equities mentioned here must do at their own risk.

Note: Click on Blog archives to read all my Blogs and updates.