After reaching more new highs recently, markets have pulled back and gotten choppy. (1)

Let's break down what's happening and why it matters.

What's driving recent volatility?

Concerns about the impact of inflation and tariffs on consumer sentiment are one major driver. (2) If Americans lose confidence in the economy, they may pull back on spending, which is the biggest driver of economic growth.

After reaching new record highs in recent weeks, markets fell earlier this week on worries that cheaper AI competition from China could pose risks to U.S. tech companies. (1) What caused the market reaction.

Let’s dive in.

What caused the tech market to move lower?

Much of the market run-up over the last two years has been driven by AI mania, with U.S. companies leading the charge. However, this narrative faced a test when DeepSeek, a Chinese tech startup, released an advanced (much cheaper) AI model.

I hope your start to the new year has been going well and that you made some special memories with your loved ones over the holidays. For my part, please know that it was a joy to serve you last year, and I greatly look forward to working with you in the year ahead!

As we step into 2025, I thought it would be beneficial to take a moment and reflect on what an extraordinary year 2024 was for investors.

[Not interested in market commentary? Skip to the postscript for a fun fact about 2025.]