Market Stories by Fathom 23 01 2025

Good morning,

The lead-up to the inauguration reignited interest in the "Trump 2.0 trade" over the past week, with growth and meme-focused themes outperforming. While the impact of the numerous executive orders remains to be fully assessed, concrete actions on tariffs have yet to materialize, with the administration so far employing only assertive rhetoric. Interest rates continue to hover near their highs from the previous quarter, despite a brief reprieve following last week’s encouraging CPI data. The market is currently contending with a substantial supply of sovereign and corporate issuances, which have exceeded $250 billion for the month. While these numbers were anticipated, they remain highly significant. We are utilizing this window to increase exposure to high-quality fixed-income assets. Although spreads remain relatively tight, the risk-return profile remains appealing for conservative investors.

The past week also witnessed several significant symbolic developments, underscoring the evolving global landscape. Prior to the inauguration, the Trump system launched two meme coins—$TRUMP and $MELANIA—which rapidly ascended to multibillion-dollar valuations over the weekend. Izabella Kaminska, a renowned writer at "The Blind Spot," has conducted extensive research on the historical parallels of such currency events. She suggests that $TRUMP shares similarities with the coin issued by Gaius Octavius following his victory over Cleopatra and Mark Antony at the Battle of Actium. That victory not only marked the transformation of Octavius into Augustus, the first Roman Emperor, but also symbolized the end of internal and external wars, ushering in the Pax Romana. Similarly, the $TRUMP coin carries both monetary and symbolic value, serving as a tool to constrain the Federal Reserve's inflationary policies, while enabling Trump to build a financial war chest independent of Congressional oversight. Counterparties seeking presidential favor may now feel compelled to support the Trump system meme coin offerings, bypassing the traditional hurdles of Congressional hearings and financial audits.

In the final moments of his presidency, President Biden issued his own highly valuable form of currency—Presidential Pardons. Announced just 45 minutes before his term concluded, and coinciding with the highly unusual indoor swearing-in ceremony. Many thanks to Dr. Pippa Malmgren of the Geopolitica Institute, who provided key insights.

Meanwhile, the announcement of the $500 billion "Stargate AI Infrastructure Project" further underscores the shifting power dynamics in the global landscape. Notably, funding for this ambitious initiative will reportedly come from entities lacking sufficient financial capacity—Microsoft being a notable exception. The project’s coordination by SoftBank, known for its Vision Fund disaster and precarious balance sheet (with a debt-to-EBITDA ratio of 6x), raises questions about the project’s viability, particularly given the dubious valuation of SoftBank’s stake in ARM Holdings.

The inauguration also highlighted the ascendancy of Tech entrepreneurs and billionaires as the new world rulers. Meanwhile Europe unveiled its comprehensive AI regulation framework—a detailed guide suitable for compliance officers but potentially stifling for startups—the framework at least seeks to address the ethical dimensions of artificial intelligence. This stands in stark contrast to the United States, where such considerations appear increasingly sidelined by the new ruling elite. Has the concept of "ethos" become a relic in this new era of governance?

Alexandros Tavlaridis