The Economy’s Weekly Recap

2/24/25 - 3/2/25

Raymond Lin

This Week’s Prominent Events

Bitcoin’s Wild Ride

• Following President Donald Trump’s inauguration, cryptocurrency enthusiasts were elated by his ardent support and anti regulatory attitude, driving Bitcoin’s price to a record high of $109,241. However, in the weeks since Bitcoin has struggled due to a lack of active catalysts to justify its elevated price. 

• Paired with general fears surrounding Trump’s tariffs and tech industry concerns regarding AI, Bitcoin slid to a 3 month low of $84,452, down 23% from its peak. In the last week, investors have withdrawn around $1 billion from Bitcoin ETFs, showing investor unease with the volatile asset. It is also possible that hackers stealing $1.5 billion of Bitcoin from cryptocurrency platform Bybit may have undermined investor confidence. 

• However, on Sunday, President Trump named some cryptocurrencies that would be included in a US Crypto Strategic Reserve. This led Bitcoin to suddenly jump 10% on Sunday alongside Ethereum and 3 smaller currencies President Trump said would be included. This jump is in spite of the fact that Trump’s support for a receive was already public knowledge and that there’s still no confirmation if, let alone how such a reserve will be created. If nothing else, Bitcoin’s recent wild journey is a microcosm that demonstrates its identity and volatility.

Nvidia’s Earnings

• Contributing around 22% of the S&P 500’s gain last year and underpinning the AI boom, Nvidia’s importance cannot be discounted when talking about the future of the economy. When looking at Nvidia’s Q4 earnings, it seems that this will continue to be the case as it reported revenue and net income of $39.33 billion and $22.09 billion for Q4, beating estimates of $38.05 billion and $20.85 billion. 

• This means that Nvidia’s revenue grew 78% from a year ago and net income rose 80%. While growth has technically slowed from the astronomical heights of prior quarters, it still marks impressive growth and was anticipated by investors. A major contributor to this growth was Nvidia’s new Blackwell AI chip, which Nvidia is still ramping up production of. As a result, Nvidia anticipates $43 billion in revenue this quarter, suggesting Nvidia still believes companies will keep spending on AI despite the revelations of China’s DeepSeek R1 AI.

• However, after the earnings report came out, Nvidia’s stock fell 8.5%, wiping hundreds of billions from its market cap. This was in part due to the aforementioned slowing of growth. With a PE ratio in the 40s, investors are eagerly anticipating future growth, so its deceleration depressed investor sentiments. 

• Additionally, two concerns linger in investors’ minds: breakthroughs of Deepseek and Trump’s tariffs. Aiming to assuage these fears, Nvidia CFO Colette Kress said that the development of efficient AI like DeepSeek’s R1 won’t harm Nvidia’s future because the future of AI is in AI “thinking” rather than just inference, combining many pieces of information with rationale rather than spitting out information. Kress claimed that such “thinking” AI will require “as much as 100 times the amount of Nvidia chips.” With tariffs though, Kress was less positive, saying tariffs were “an unknown” for now. With Commerce Secretary Howard Lutnick telling Congress during his confirmation hearing that US tech companies “need to stop helping” China, it's likely that China, which comprises 15% of Nvidia’s revenue, will become increasingly cut off and that Nvidia’s growth will suffer as a result.

Decline of DEI

• While the anti-DEI wave has been growing for some time, something Phi Fiscal covered before its long hiatus, its popularity has spread like wildfire ever since President Trump’s inauguration. Openly anti-DEI, many companies adopted his conservative attitude, ending or downsizing DEI programs. Some notable examples include Walmart, Target, Disney, Meta, Amazon, Pepsi, Citigroup, and Goldman Sachs, among others. 

• This treatment of DEI as an enemy to be vanquished, even when its influence has been meager, has been denied, however, at some companies. Last week, a proposal created by the National Center for Public Policy Research, a self described conservative think tank, urged Apple to end its DEI policies. The think tank reasoned that DEI is bad for business and opens Apple up to litigation from both individuals and possibly the Trump administration. On Truth Social, Trump supported the proposal, saying "Apple should get rid of DEI rules [...] DEI was a hoax that has been very bad for our country. DEI is gone!!!" Unfortunately for President Trump, Apple investors didn’t seem to be of the same mind though as 97% of outstanding Apple shares cast ballots against the measure. Following the rejection, Apple CEO Tim Cook said “We will continue to create a culture of belonging.” 

• This rejection follows in the wake of another high profile defense of DEI last month when Costco’s board of directors, facing an anti DEI proposal also by the National Center for Public Policy Research, unanimously opposed the proposal alongside 98% of votes, stating that “our commitment to an enterprise rooted in respect and inclusion is appropriate and necessary.” The board also said that the DEI policies were legally appropriate and that “these efforts enhance our capacity to attract and retain employees who will help our business succeed.” Some other companies that have continued their DEI policies include Ben & Jerry’s, Delta Air Lines, and JPMorgan Chase. However, these companies very much stand as exceptions rather than the norm as most companies have followed the dictates of the new administration. 

CFPB Assassination

• While Phi Fiscal aims to truthfully cover topics with minimal bias, it is undoubtedly true that many of the new presidential administration’s policies are impacting the economy and business world, making for the third(and not last) politics-related story in this week’s newsletter. 

• The Consumer Financial Protection Bureau (CFPB) was founded in 2011 after the Great Recession to monitor consumer loans and better regulate the banking system. Over the last 14 years, it claims to have helped win consumers $21 billion through monetary compensation from lawsuits, canceled debt, and more. However, it has long been criticized by the banking industry and some Republicans, including Trump, which has resulted in its untimely demise.

• As of last week, it seems apparent that most of the CFPB’s 1700 employees will be fired as the agency is “winded down.” While Trump’s head of the CFPB Russell Vought claims the CFPB will continue to operate as a “more streamlined and efficient bureau,” that line of thinking is doubtful. After all, in the first few weeks of Trump’s presidency, the CFPB has dropped numerous lawsuits that it had begun litigating in prior months. Some examples include…

  • A lawsuit against Capital One for cheating customers out of $2 billion in interest payments.

  • A lawsuit against Heights Finance for pushing struggling borrowers into successive loans that incurred refinancing fees.

  • A lawsuit against Berkshire Hathaway owned Vanderbilt Mortgage and Finance for making mortgage loans to consumers it knew could not repay.

  • A lawsuit against SoLo Funds, an online lender that had camouflaged fees and cost consumers over $20 million

• For some companies, this relaxed CFPB will be a boon to continue doing their business extracting profits, but it seems doubtful that consumers won’t be worse off as a result of this policy of the Trump administration.

Automobile Challenges And Success

• As we covered in last week’s story “Nikola [and] Tesla,” automobile companies have been struggling in the face of slowing EV growth, stiff competition, and the threat of tariffs. One such company that has been coping with these issues has been Stellantis, which reported its Q4 earnings last week. Taken altogether, 2024 was a poor year for Stellantis, with revenue of 156.9 billion euros, down 17% from 2023. Similarly, Stellantis reported a net income of 5.5 billion euros, down 70% from 2023’s 18.6 billion euros. However, Stellantis expects positive growth to return in 2025.

• This relatively positive sentiment was also captured by Stellantis’s Big 3 peers Ford and GM in their earnings earlier this year. Ford’s 2024 saw solid growth, with revenue and net income climbing to $185 billion and $5.9 billion, up 5% and 35% from 2023 respectively. GM was a bit more mixed, reporting revenue of $187 billion, up 9.1% annually, and net income of $6 billion in 2024, down 41%. Even EV focused companies like Rivian did relatively well, with it reporting its first ever quarterly profit in Q4 last year on the back of 2024’s 7% EV sales growth in the US. But even in these positive stories, there lies an unfortunate fact: EVs are simply no longer capturing the public’s attention. In 2023, US EV sales were growing at 46% and automakers were pouring billions into developing EVs. Now, AI has replaced it at the forefront of technology.

• With President Trump’s tariffs on Canada, Mexico, steel, and aluminum soon to come, the middling state of automakers is unlikely to change. According to Ford CEO Jim Farley, tariffs will wipe billions in profits from automakers and slow down sales growth due to unattractive higher car prices, which is why all of the Big 3’s stocks are down YTD.

Future Events

DOGE’s Savings

• On many editions of Phi Fiscal, the continual disregard politicians have had towards the deficit and the ever growing federal debt burden has been criticized, so any effort to improve the US’ fiscal situation is worth discussing. The Department of Government Efficiency (DOGE) has made such an effort, but its results have been generally mixed.

• Doge claims to have saved taxpayers $55 billion so far, but it has been heavily criticized for its falsely reported savings. Some examples include…

  • DOGE incorrectly reporting an ICE saving as $8 billion when it was actually $8 million.

  • An adjustment to a US AID contract that DOGE claimed saved $2 billion when it is thought to actually have only saved $18 million.

  • DOGE canceling a part of a contract with the defense contracting giant Leidos worth only $560,000 but mistakenly believing it had canceled the whole contract and saved $232 million.

  • A canceled NIH agreement that saved less than a million dollars but which DOGE claimed saved $99 million.

  • Much of the claimed $55 billion not having receipts yet, with much of the saving presumably tied to ending US AID, an action that has yet to be legally authorized

• Overall, NPR estimates that only around $2 billion has been 100% confirmed as canceled, although that figure could obviously grow as the dispute over US AID ends and the gutting of the civil service is complete. However, given that House Republicans have passed a budget bill for $4.5 trillion in tax breaks over the next decade and increasing the debt limit by $4 trillion, it seems unlikely that the US’ deficit will be solved anytime soon and that DOGE is just taking one drop out of a very large bucket.

A Continued Battle

• Nearly 4 years after inflation began to pick up in 2021, it seemed that the beast had yet to be defeated earlier this month when January’s CPI inflation report came out. In that report, inflation rose 0.5% monthly and 3% annually, above expectations and higher than December’s CPI inflation of 2.9% annually. 

• However, last week, PCE inflation figures were published, the preferred gauge of inflation for the Federal Reserve. The PCE data painted a rosier picture, with inflation rising 0.3% monthly and 2.5% annually in line with expectations. Core PCE inflation, which excludes volatile goods like energy and food, rose 0.3% and 2.6% annually, down from 2.9% in December. Although the PCE figures are less alarming than the CPI data, the Federal Reserve is unlikely to continue cutting interest rates anytime soon given that inflation has proved more resilient than anticipated. 

• With high consumer inflation expectations and the possibility of Trump’s tariffs hiking prices, it seems wise for policymakers at the Federal Reserve to be more cautious.

Shocking GDP Predictions

• American GDP growth has been growing steadily for the last few quarters as the American economy has been surprisingly robust compared to its peers. However, in 2024, that growth has been variable, with Q4 seeing 2.3% annualized GDP growth. This was down from 3.1% in Q3 and below estimates of 2.5%. Overall though, the American economy did well, growing 2.8% for the year compared to 2.9% the prior year. 

• However, 2025’s growth appears to be more uncertain. The Federal Reserve Bank of Atlanta releases a GDPNow tracker that roughly estimates GDP growth for the current quarter based on available economic data. Often, it is not entirely accurate, and it often only becomes more accurate near the end of the quarter. Nonetheless, its preliminary estimate is concerning. 

• Last week, it estimated that the American economy would contract by 1.5%, which would be the first quarterly GDP decline since Q4 2020. Earlier in February, GDPNow forecast GDP as high as 3.9%, but data on consumer spending and net exports have changed the estimate. Based on January’s PCE report, personal spending 0.5% when adjusted for inflation, which the Fed’s economists estimate will shave a whole percentage point off GDP. Additionally, net exports' contribution to GDP went from -0.41% to -3.7% on the back of companies increasing imports before tariffs came into effect. Thus, it is possible that this economic decline, even if GDPNow is correct, may not be as bad as it seems once net exports return to normal levels. 

• However, the poor economic policies of the new administration may truly be that devastating as, on Monday, FedNow gave a new estimate of a 2.8% GDP decline, even more severe than the initial 1.5% drop estimate. This change was made based on data from the Census Bureau and the Institute for Supply Management, which showed weaker than expected manufacturing activity and a fall in construction spending.

Weekly Question

When in the last 5 years has GDP growth been highest?

• A: Q3 2023

• B: Q1 2022

• C:  Q2 2021

• D: Q4 2022

Answer: C. In Q2 2021, annualized Real GDP growth was at 11.9% as the US economy opened back up and began recovering from Covid with extensive federal spending supporting the economy. In retrospect, perhaps the inflation of today isn’t too surprising given how fast the economy was growing after the pandemic.