GOOG 2025 capex guidance increase shows AI/data-center visibility strong. Jan ISM upturn points to accelerating small-cap EPS growth. Array ( [cookie] => cbcac2-34fe62-704b59-ecce7e-5efe44 [current_usage] => 1 [max_usage] => 2 [current_usage_crypto] => 1 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 40353 [reason] => Usage under limits [method] => ) 1 and can accesss 1

VIDEO: Incoming data supports equity prices.  The ISM manufacturing also suggests small-cap EPS to accelerate in 2025.

Please click below to view our Macro Minute (duration: 4:58).

To me, it is a sign of strength that the S&P 500 is flat/up slightly in the face of two “negative shocks” that many expected each could drive a 5% to 10% correction — DeepSeek R1 (last week) and Drug Tariff wars (Monday). That is my biggest takeaway over the past 5 trading days. Equity markets in 2025 are demonstrating the same resilient character we saw in 2024 (and 2023):

• In this data heavy week, the data has been overall favorable:
  – 2/3 Mon 9:45 AM ET: Jan F S&P Global Manufacturing PMI    51.2 vs 50.1e
  – 2/3 Mon 10:00 AM ET: Jan ISM Manufacturing PMI    50.9 vs 50.0e
  – 2/4 Tue 10:00 AM ET: Dec JOLTS Job Openings    7600k vs 8000ke
  – 2/4 Tue 10:00 AM ET: Dec F Durable Goods Orders MoM    -2.2% vs -2.2%
  – 2/5 Wed 8:30 AM ET: Dec Trade Balance    -$97be
  – 2/5 Wed 9:45 AM ET: Jan F S&P Global Services PMI    52.9e
  – §2/5 Wed 10:00 AM ET: Jan ISM Services PMI    54.0e
  – 2/6 Thu 8:30 AM ET: 4Q P Nonfarm Productivity    1.2%e
  – 2/6 Thu 8:30 AM ET: 4Q P Unit Labor Costs    3.4%e
  – 2/7 Fri 8:30 AM ET: Jan Non-farm Payrolls    170ke
  – 2/7 Fri 10:00 AM ET: Feb P U. Mich. 1yr Inf Exp    3.3%e
  – 2/7 Fri 9:00 AM ET: Jan F Manheim Used Vehicle Index
• On Tuesday, Dec JOLTS job openings fell to 7.6mm vs consensus of 8.0mm. This is the second lowest reading since the pandemic and a sign the job market is cooling. Will this be a harbinger for the Jan jobs report? JOLTS lags, so hard to say. But this is another sign of weakening inflationary pressures. Add this onto the previous data of Dec CPI, Dec Core PCE and BLS New Tenant Rent Index (all showing weaker inflation).
• Earnings has also been supportive of stocks generally. This remains the heaviest week for 4Q24 EPS and after the close Tuesday were 2 major EPS reports:
  – GOOG -8.01%  AMD -9.12%
  – both down after reporting results
• In GOOG -8.01%  case, the company raised capex guidance to $75 billion for 2025 vs $58 billion prior and versus $64 billion Street consensus. This is a sizable increase and a reminder that capex plans for AI and data center spending remain strong, even if one thinks DeepSeek represents a threat to those figures.

• There is a lot of Fed speak this week and on Wednesday, we highlight Austin Goolsbee (below):
  – 2/3 Mon 12:30 PM ET: Bostic Speaks on Economic Outlook
  – 2/3 Mon 6:30 PM ET: Musalem Gives Welcoming Remarks   
  – 2/4 Tue 11:00 AM ET: Bostic Speaks in Moderated Conversation on Housing   
  – 2/4 Tue 2:00 PM ET: Daly Speaks in Moderated Panel   
  – 2/4 Tue 7:30 PM ET: Jefferson Speaks on Economic Outlook, Policy   
  – 2/5 Wed 9:00 AM ET: Barkin Speaks in a Fireside Chat   
  – 2/5 Wed 1:00 PM ET: Goolsbee Gives Remarks at Auto Conference   
  – 2/5 Wed 3:00 PM ET: Bowman Gives Update on Economy, Bank Regulation   
  – 2/5 Wed 7:30 PM ET: Jefferson Gives Lecture   
  – 2/6 Thu 2:30 PM ET: Waller Speaks on Future of Payments   
  – 2/6 Thu 5:10 PM ET: Logan Speaks on Future of Payments
  – 2/7 Fri 9:25 AM ET: Bowman Gives Update on Economy, Bank Regulation   
  – 2/7 Fri 12:00 PM ET: Kugler Speaks on Entrepreneurship, Productivity   
• We have received a number of questions from investors about small-caps. We remain confident that a multi-year positive outperformance cycle is starting. In fact, the Jan ISM certainly strengthens the case for this.
  – the chart below highlights ISM manufacturing leads Russell 2000 EPS growth by 4 months
  – past upturns in ISM >50 lead to surges in IWM 0.61%  EPS growth
  – this was true in every cycle since 1996
  – and since even 2009
• We see this as being relevant in 2025. And moreover, the relative valuation argument for small-caps is intact:
  – Russell 2000 median P/E 2026: 13.6X
  – S&P 500 median P/E 2025: 17.2X
  – Russell 2000 EPS growth is nearly 3X faster in 2025
• So you get the picture. The risk/reward is still attractive for small-caps.

• Finally, a reason to be optimistic about 2025 is that we got a positive January close. This is the January barometer “as January goes, so goes the year”:
  – The January barometer is as follows:
  – If January positive:
  – Median FY +19%, 89% win-ratio
  – If January negative:
  – Median FY +0%, 50% win-ratio
• Overall, there are six reasons that show 2025 tracking better than our base case:
  – Barometer “first 5 days” positive = 82% win-ratio
  – Sentiment capitulation on Dec to Jan chop = good
  – Inflation tracking “softer” than consensus view
  – Fears of “day 1 tariffs” overblown = USD weaker
  – Cyclicals leading YTD = risk-on signal
  – January barometer “positive” = 89% win-ratio

Bottom line, 2025 is tracking better than our base case. Despite the near-term turmoil from the tariffs being announced, we remain constructive and now see 2025 as less turbulent than we expected. The top sector ideas remain:

• Bitcoin
• Small-caps
• Financials
• Industrials
• Technology

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44 SMID Granny Shot Ideas: We performed our quarterly rebalance on 11/25. Full stock list here -> Click here

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Key incoming data February:

• 2/3 9:45 AM ET: Jan F S&P Global Manufacturing PMI Tame
• 2/3 10:00 AM ET: Jan ISM Manufacturing PMI Tame
• 2/4 10:00 AM ET: Dec JOLTS Job Openings Tame
• 2/4 10:00 AM ET: Dec F Durable Goods Orders Tame
• 2/5 8:30 AM ET: Dec Trade Balance
• 2/5 9:45 AM ET: Jan F S&P Global Services PMI
• 2/5 10:00 AM ET: Jan ISM Services PMI
• 2/6 8:30 AM ET: 4Q P Non-Farm Productivity
• 2/6 8:30 AM ET: 4Q P Unit Labor Costs
• 2/7 8:30 AM ET: Jan Non-Farm Payrolls
• 2/7 9:00 AM ET: Dec F Manheim Used Vehicle index
• 2/7 10:00 AM ET: Feb P U. Mich. Sentiment and Inflation Expectation
• 2/10 11:00 AM ET: Jan NY Fed 1yr Inf Exp
• 2/11 6:00 AM ET: Jan Small Business Optimism Survey
• 2/12 8:30 AM ET: Jan CPI
• 2/13 8:30 AM ET: Jan PPI
• 2/14 8:30 AM ET: Jan Retail Sales Data
• 2/18 8:30 AM ET: Feb Empire Manufacturing Survey
• 2/18 10:00 AM ET: Feb NAHB Housing Market Index
• 2/18 4:00 PM ET: Dec Net TIC Flows
• 2/19 9:00 AM ET: Jan M Manheim Used Vehicle index
• 2/19 2:00 PM ET: Jan FOMC Meeting Minutes
• 2/20 8:30 AM ET: Feb Philly Fed Business Outlook
• 2/21 9:45 AM ET: Feb P S&P Global Manufacturing PMI
• 2/21 9:45 AM ET: Feb P S&P Global Services PMI
• 2/21 10:00 AM ET: Feb F U. Mich. Sentiment and Inflation Expectation
• 2/21 10:00 AM ET: Jan Existing Home Sales
• 2/24 8:30 AM ET: Jan Chicago Fed Nat Activity Index
• 2/24 10:30 AM ET: Feb Dallas Fed Manuf. Activity Survey
• 2/25 9:00 AM ET: Dec S&P CoreLogic CS home price
• 2/25 10:00 AM ET: Feb Conference Board Consumer Confidence
• 2/26 10:00 AM ET: Jan New Home Sales
• 2/27 8:30 AM ET: 4Q S GDP
• 2/27 10:00 AM ET: Jan P Durable Goods Orders
• 2/28 8:30 AM ET: Jan PCE Deflator

Key incoming data January:

• 1/2 9:45 AM ET: Dec F S&P Global Manufacturing PMI Tame
• 1/3 10:00 AM ET: Dec ISM Manufacturing PMI Tame
• 1/6 9:45 AM ET: Dec F S&P Global Services PMI Tame
• 1/6 10:00 AM ET: Nov F Durable Goods Orders Tame
• 1/7 8:30 AM ET: Nov Trade Balance Tame
• 1/7 10:00 AM ET: Dec ISM Services PMI Tame
• 1/7 10:00 AM ET: Nov JOLTS Job Openings Tame
• 1/8 9:00 AM ET: Dec F Manheim Used vehicle index Tame
• 1/8 2:00 PM ET: Dec FOMC Meeting Minutes Tame
• 1/10 8:30 AM ET: Dec Non-Farm Payrolls Hot
• 1/10 10:00 AM ET: Jan P U. Mich. Sentiment and Inflation Expectation Hot
• 1/13 11:00 AM ET: Dec NY Fed 1yr Inf Exp Tame
• 1/14 6:00 AM ET: Dec Small Business Optimism Survey Tame
• 1/14 8:30 AM ET: Dec PPI Tame
• 1/15 8:30 AM ET: Dec CPI Tame
• 1/15 8:30 AM ET: Jan Empire Manufacturing Survey Tame
• 1/15 2:00 PM ET: Jan Fed Releases Beige Book Tame
• 1/16 8:30 AM ET: Dec Retail Sales Data Tame
• 1/16 8:30 AM ET: Jan Philly Fed Business Outlook Mixed
• 1/16 10:00 AM ET: Jan NAHB Housing Market Index Tame
• 1/17 9:00 AM ET: Jan M Manheim Used vehicle index Tame
• 1/17 4:00 PM ET: Nov Net TIC Flows Tame
• 1/24 9:45 AM ET: Jan P S&P Global Manufacturing PMI Tame
• 1/24 9:45 AM ET: Jan P S&P Global Services PMI Tame
• 1/24 10:00 AM ET: Jan F U. Mich. Sentiment and Inflation Expectation Hot
• 1/24 10:00 AM ET: Dec Existing Home Sales Tame
• 1/27 8:30 AM ET: Dec Chicago Fed Nat Activity Index Tame
• 1/27 10:00 AM ET: Dec New Home Sales Tame
• 1/27 10:30 AM ET: Jan Dallas Fed Manuf. Activity Survey Tame
• 1/28 9:00 AM ET: Nov S&P CoreLogic CS home price Tame
• 1/28 10:00 AM ET: Jan Conference Board Consumer Confidence Tame
• 1/28 10:00 AM ET: Dec P Durable Goods Orders Tame
• 1/29 2:00 PM ET: Jan FOMC Decision Tame
• 1/30 8:30 AM ET: 4Q A 2024 GDP Tame
• 1/31 8:30 AM ET: Dec PCE Deflator Tame
• 1/31 8:30 AM ET: 4Q Employment Cost Index Tame

Economic Data Performance Tracker 2025:

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023: