Hedgeye CEO Keith McCullough recently shared his insights on market trends with David Lin, host of The David Lin Report. According to McCullough, the recent development of DeepSeek’s AI model for $6 million is a game-changer that is challenging traditional assumptions about cutting-edge AI development.
The cheaper AI development has significant implications for high-margin tech names like Nvidia and other tech sell-offs. Markets are repricing expectations for AI’s future cost structure, indicating a shift in the market’s perception of what it costs to develop innovative technology.
However, McCullough remains cautious on inflation and growth data, warning that investors expecting immediate rate cuts from the Federal Reserve are misreading the data. The Fed is reacting, not leading, and there is no certainty for a rate cut cycle in 2025.
The Bank of Japan’s policy shift is also significant, as higher Japanese yields make the yen more attractive, pulling capital away from US assets. This could force portfolio reallocations away from US stocks and bonds.
McCullough advises against blindly buying high-multiple stocks, warning that the growth-at-any-price trade is a losing strategy. He favors selective growth stocks, taking into account market structure changes and understanding sector setups.
With Trump back in the White House, markets are positioning accordingly, with sectors like energy, financials, and defense expected to benefit. Meanwhile, rate-sensitive sectors face headwinds in a higher-rate environment.
A steepening yield curve signals inflation expectations and potential growth acceleration, contradicting the soft-landing narrative. The US dollar remains dominant but global currency shifts are changing capital flows.
Emerging markets are getting crushed due to a strong US dollar, rising interest rates, and weak capital flows. McCullough sees Bitcoin and Gold as part of a bigger macro play, with each asset performing well in specific economic conditions when properly timed.
In summary, McCullough’s message is clear: Markets move in cycles, and the key to winning is positioning ahead of those cycles.
Source: https://app.hedgeye.com/insights/161618-hedgeye-s-keith-mccullough-deepseek-nvda-top-trump-trades-more?type=macro,market-insights