Monday's Markets Update (February 17, 2025)

18 Feb 2025 by rate3

On Monday, with main markets closed for a holiday, EU defense equities surged on expectations of increased military spending following Vance's Munich speech. Gold and oil are fluctuating amid growing anticipation of Ukraine war peace talks. BTC is declining as institutional investors continue to de-risk. SOL has been hit the hardest as ETH outperformed, allegedly due to large purchases by some private funds.

Crypto

Digital asset investments saw $415M in outflows after a 19-week $29.4B inflow streak, likely due to a hawkish Fed stance and high US inflation. BTC led outflows at $430m, while Solana, XRP, and Sui saw inflows. 1Y trend: "Side" (source)

World Markets

European stocks rallied on Monday, hitting new record highs. Defense stocks surged amid expectations of increased defense spending after Vance's Munich speech. Peace negotiations on Ukraine are set to begin. Trump reaffirmed plans to impose tariffs on foreign cars. 1Y trend: "Up"
In December 2024, the Euro Area achieved a trade surplus of €15,467.70M. Historically, the trade balance averaged €5,649.61M (1999-2024), peaking at €29,946.10M in July 2015 and hitting a low of -€54,922.70M in August 2022. 1Y trend: "Side" (Eurostat)

Comment: What's Up With DOGE? (2)

Within Accenture, during the era of "business process re-engineering," we categorized client projects based on a 2x2 matrix. The horizontal axis represented the client's budget, ranging from no budget to an unlimited one, while the vertical axis represented the client's needs, from "not needed at all" to "very urgent."

I suspect that Elon Musk does not perceive his current interactions with governmental bodies as a "re-engineering" endeavor. I believe his approach is closer to a crusade, and his core team likely consists not of business process experts, but of bug-hunters who see themselves as "people's auditors."

If I were to classify Musk's current governmental involvement using our framework, I would place it squarely in the fourth quadrant: "high-need, low-budget." The term "budget" here encompasses not only financial resources but, more crucially, the time required to re-engineer a vast organization like the bureaucratic apparatus of the world's largest economy. Even a four-year timeframe (I am not sure Musk has so much time for his escapades) is insufficient for this task, especially lacking the necessary experience and broad political agreement.

Consequently, Musk will likely focus on easily achievable and attention-grabbing initiatives. He will likely overlook the more complex task of achieving substantial improvements in government effectiveness and reductions in long-term costs. This ultimately means that the primary political objective – reducing government spending to curb inflation – will remain elusive. Only systemic, far-reaching changes to the government's "business processes" can significantly reduce government expenses and meaningfully impact inflation.