March 2, 2025

The S&P 500 declined 1.0% this week. The Bloomberg Aggregate Bond Index gained 1.3%, gold fell 2.8%, and Bitcoin got clobbered by -11.2%.

Consumer confidence declined in February and the Future Expectations Index fell 9 points. New homes sales dropped 10% in January, while the median home price continued to rise. The Personal Consumption Expenditures (PCE) Price Index increased at a 2.5% annual rate of change. This means inflation is still above the Fed's 2% target at a time when the economic growth outlook is also becoming cloudier. In other words, stagflation.

DOGE’s Small Wins Drowned by Deficit Deluge

Picture a friend who brags about paying off a $1,000 credit card balance—chest puffed, victory lap taken—while discreetly racking up a $10,000 tab on another card. Net result? They’re deeper in debt, despite the fanfare. That’s the fiscal irony unfolding in Washington. The Department of Government Efficiency (DOGE), led by Elon Musk, has grabbed headlines for cutting roughly $100 billion from federal spending. Some doubt that figure and claim the real number is closer to $2 billion. Regardless, the DOGE savings won't do much to fix the deficit, because the government is still going way more into debt. 

The House Republicans’ budget proposal authorizes a $2.8 trillion deficit surge over the next decade. The House GOP plan extends Trump’s 2017 tax cuts ($4.5 trillion over 10 years), trims safety nets like Medicaid, and boosts the debt ceiling by $4 trillion. Despite DOGE’s cuts and $2 trillion in other reductions, the Congressional Budget Office, per Bloomberg, projects a $2.8 trillion deficit hike through 2034. Debt-to-GDP climbs from 117% to 125%. This isn’t restraint—it’s a borrowing binge masked as reform. The bet? Tax cuts will turbocharge growth, filling Treasury coffers. History says otherwise: post-2017, deficits ballooned despite a growth pop.

So, investors should expect more fiscal deficits. Deficit spending usually leads to a weaker US dollar and higher inflation. Another takeaway is that it doesn't matter who runs Washington from a fiscal perspective. Neither Republicans nor Democrats have shown themselves capable of balancing the budget. This is why we are long-term investors in gold and Bitcoin.  

Atlanta Fed GDPNow Signals Economic Slowdown for Q1 2025

The Atlanta Fed's GDPNow model has slashed its estimate for real GDP growth in Q1 2025 to -1.5%, a sharp drop from 2.3% just nine days prior. This downgrade, reported on February 28, reflects a troubling shift in economic momentum. The primary culprits? Weak consumer spending and a plunging contribution from net exports. Data from the US Bureau of Economic Analysis and Census Bureau revealed a 0.5% inflation-adjusted decline in January personal consumption, alongside a steep fall in net exports’ impact.

Looking ahead, several factors could further dampen growth in 2025: persistent inflation pressures, softening consumer confidence, and rising unemployment claims signal potential headwinds. Global trade disruptions and geopolitical uncertainty may also weigh on exports. While the GDPNow estimate may shift with new data, this negative turn underscores growing economic challenges as the year unfolds. We have responded to the shift in economic momentum by migrating toward high cash levels and less cyclical holdings.

Nvidia Falls After Earnings Beat

This week, NVIDIA reported stellar Q4 fiscal 2025 earnings, with revenue hitting $39.3 billion—up 78% year-over-year and slightly above Wall Street’s $38.1 billion estimate. Net income soared to $21.1 billion, reflecting robust demand for its AI-centric chips. Yet, despite the beat, NVIDIA’s stock tumbled over 8% on Thursday. 

Why the sell-off? Investors fixated on a slowing growth trajectory. The company’s Q1 revenue forecast of $43 billion, while topping estimates, signals a 65% growth rate—a far cry from the triple-digit surges of recent quarters. Gross margins are also expected to dip to 71%, stirring concerns. When a high-flier stock like NVDA starts to see its growth momentum and margins fall, it often leads to a price correction.  

Silverlight managed portfolios were short NVDA into earnings because we expected there was a high probability of a downside price reaction. We covered part of the short on Friday and will actively manage our remaining position based on how events unfold. 

Amazon Alexa Gets An Upgrade

Amazon’s Alexa+ signals a seismic shift for the future of its voice assistant ecosystem. By infusing generative AI into Alexa, Amazon isn’t just tweaking a gadget—it’s reimagining how 600 million devices worldwide integrate into daily life. This leap toward a more intuitive, conversational AI could cement Alexa as the smart-home backbone, outpacing rivals like Google Assistant or Apple’s Siri.

The $20 subscription (free for Prime members) hints at a pivot to a premium service model, potentially boosting revenue while locking users deeper into Amazon’s orbit. If Alexa+ nails complex tasks and personalization, it might evolve from a helper to a proactive companion—think anticipating needs, not just responding. Success here could pressure competitors to accelerate their AI game, sparking an arms race in ambient computing. Silverlight managed portfolios are long Amazon. 

105-Year-Old Raver Proves Age Is Just a Number

Hilda Jackson, a 105-year-old party enthusiast, turned Holbrook Hall Care Home in Derbyshire, England, into a rave scene last Tuesday to celebrate her milestone birthday. Swapping her walker for glowsticks and UV paint, Hilda danced to disco classics spun by a DJ in the lounge, joined by 70 guests, including family and fellow residents. The care home’s “open bar” flowed—Hilda savored a gin and tonic—while Nottingham rapper Bru-C dropped a custom rap for the occasion. .

Born under King George V, Hilda’s lived through 22 Prime Ministers and drove until 100. A tennis lover and avid traveler, she credits her longevity to staying active and dancing—once cruising the world with her sister Vera. “Just keep batting,” she advises, grinning. At 105, Hilda’s not slowing down—she’s raving on.

This material is not intended to be relied upon as a forecast, research or investment advice. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and non-proprietary sources deemed by Silverlight Asset Management LLC to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Silverlight Asset Management LLC, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any of these views will come to pass. Reliance upon information in this post is at the sole discretion of the reader.​​