February 27, 2025
Two months into 2025 and we are off to the races. It’s been a reminder that the day to day and minute to minute movements of the stock market can often overshadow the longer-term.
The arrival of DeepSeek, a Chinese artificial intelligence company few knew about, caused the largest single-day individual security loss of value in U.S. stock market history by wiping $589 Billion off NVIDIA’s market value due to DeepSeek’s development of an AI model at a fraction of the cost.1 Investor behavior was described aptly as “Something goes from 1 to 10, goes back to 9, people freak out.”2
And yet the biggest news has been the recent set of tariffs on our trading partners near and far. It’s not the first time President Trump has enacted tariffs lest we forget, and for those keeping score, most of the tariffs imposed in his original term were kept in place by former President Biden, with additional tariffs added in 2024.
If you’re interested in the nitty gritty of the tariffs you can read more here.3 Suffice to say, it has sparked lots of chaotic news, and may have a negative impact on the average American’s economic position. The only apparent benefit is raising tax collections…
At a time when some investors are feeling concerned about the future, it’s interesting to see what the financial industry is cooking up. On stage right appears “alternative investments,” or as the cool kids call them “alts.” Specifically, private equity is trying once again to enter your retirement plan not to simplify your investments, but to give you more “choice.”
As if understanding the transparent public market (stock market) wasn’t complicated enough for investors, the private-equity industry is lobbying once again to allow retirement plans to invest in potentially opaque non-public (privately) traded investments including leveraged buyouts, low-rated private loans and illiquid property deals.4
As I am sure you can imagine, these private equity investments can carry higher fees. The standard fee structure in private equity is 2 and 20. A 2% annual management fee and 20% of the profits made.5 The proponents of adding alternative investments to retirement plans would argue that an increased menu of investments is to the benefit of investors.
However, in practice adding more investment options may not translate to sound investment decisions by participants, or most importantly, better investment outcomes. We will see what if anything happens in the coming years.
A quick reminder that today, February 28th, is the expected final release date for 1099 tax forms at Schwab. If you log into your account, under statements and tax forms the 1099 dashboard will show you the tax forms for each of your accounts for 2024. If you have questions, please let me know.
Finally, as income tax filing approaches, if you haven’t already made Roth/Traditional/SEP IRA contributions, there is still time to do so for tax year 2024, income permitting. As we continue into the new year, if you have questions about your 2025 investment savings/contributions, please let me know!
- Peter Egolf
1. A record previously held by Nvidia, though about half the scale in September 2024.
2. Nvidia’s stock rout is the beginning of more pullbacks (Business Insider)
3. Trump Tariffs: Tracking the Economic Impact of the Trump Trade War (Tax Foundation)
4. Private equity In 401(k) plans? (Morningstar)
5. Understanding the Private Equity Fee Structure: How Funds Charge Fees (Private Equity bro)
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