There were several fascinating investment-affecting news stories last week. But let’s begin with one that – I think – most Americans can cheer about if they’re really being honest with themselves…

The downsizing of the IRS.

For the record, I’m not gloating about the 6,000 to 7,000 people losing their jobs. Those employees who got their termination notices last week have my most sincere sympathy.

That’s especially true since, as I understand it, many of them are “probationary” workers. In other words, they’ve been on the job for less than two years. Some a mere matter of months.

It’s rough to go through all the work of getting a job and all the stress of learning it, only to lose it so quickly. So here’s hoping they’re able to find more lasting positions as fast as possible.

More useful positions too.

Most of us know the U.S. tax code is thousands of pages long – something no single taxpayer can possibly hope to understand. It’s all too easy to mess up individual or small-business taxes without trying, thereby running afoul of IRS auditors.

So, to me, reducing the number of people who can enforce that kind of nitpicking harassment is a plus.

I know most financial media sources pushed the fear last week that everyone’s tax returns will now be in jeopardy. But according to none other than Reuters, “Probationary workers needed for processing” such things aren’t being cut.

Which should make everyone wonder what roles these now non-employees were fulfilling.

Fewer Homes Being Built

In less positive news for the average American, the U.S. housing market isn’t looking so great.

Housing starts fell 9.8% in January after seeing a nice bump upward the month before. That means fewer residential projects got underway, including single-family homes, condos, townhomes, and apartments.

This almost applied to the entire country, from the South to the Midwest to the Northeast. Only the West managed to really buck the trend.

To quote CRE Daily:

Housing starts dropped to an annualized pace of 1.37 million units, per the Census Bureau. Single-family starts fell 8.4% to 993,000 units – the first decline since October – while multifamily starts plunged 13.5% to 373,000 units.

One of the culprits, we’re told, is bad weather. This makes sense considering the brutal winter storms and frigid temperatures we’ve seen so far in 2025. Although it’s debatable which is causing more of a chill: the physical weather or mortgage rates remaining near 7%.

That latter factor is why what’s already on the market isn’t moving fast enough for anyone’s liking. Now, on the plus side for wannabe buyers, this does mean some homebuilders are rethinking their price tags and even offering mortgage-rate buydowns to gin up interest.

Which, for buyers, I guess, isn’t the worst news after all.

Walmart Could Weaken From Here

Walmart (WMT) was a big story last week, as it usually is whenever it reports earnings.

This time around, its fourth-quarter revenue rose about 4% thanks in part to its e-commerce unit. That segment jumped 20% in the U.S., indicating that Walmart is holding its ground against rival Amazon (AMZN).

This news, however, was overshadowed by Walmart’s outlook.

For one thing, analysts had expected it to forecast full-year adjusted earnings of $2.76 per share. Instead, the retailer is predicting $2.50 to $2.60. For another, Chief Financial Officer John David Rainey told CNBC that “there’s far from certainty in the geopolitical landscape.”

In other words, the developing tariffs situation could impact Walmart this year.

“We’ve lived in a tariff environment for the last seven or eight years,” Rainey explained. “And we’ll do what we know how to do. We’ll work with suppliers. We’ll lean into our private brand. We’ll shift supply where necessary to try to take advantage of lower costs that we can then pass on to consumers.”

Contrary to some opinions, around two-thirds of goods sold in Walmart are either made or assembled in the U.S. Even so, if Mexico and Canada decide to push back against Trump’s tariff threats, it could make a notable dent in Walmart’s earnings.

DeepSeek Who?

Do you remember when I wrote about the DeepSeek situation back on January 29?

It was right after the news broke that the Chinese startup had created an AI product – one that ran on extremely economical chips. In other words, they weren’t made by Nvidia (NVDA).

I quoted Nick Ward at the time, “one of my right-hand men here at Wide Moat Research.” His take on the situation went like this:

Maybe the Chinese firm figured out a way to train AI in a much more efficient way… but maybe not. (Do we really trust data that comes out of China?)

I wouldn’t be surprised if this was some sort of psyop by the People’s Republic of China in an attempt to scare off U.S. AI investment so that our gap doesn’t widen.

Well, Big Tech spending on Nvidia chips hasn’t seemed to falter since then, indicating that they agree with Nick. And now we know that consumers aren’t abandoning U.S. innovators either.

OpenAI, the San Francisco-based tech firm DeepSeek allegedly bested, just topped 400 million weekly users. And Chief Operations Officer Brad Lightcap told CNBC that developer traffic rose as well, doubling in the last six months.

We’ll see how the tech wars play out from here, as I’m sure they’re not even close to being done yet. But it certainly appears for now that companies like Nvidia and OpenAI are still in it to win it.

A Word About the German Elections

Germany is Europe’s largest economy and is extremely influential in how the European Union is run. So its elections matter, not just for the German people but for their neighbors as well.

They also matter for everyone who does business with the European Union. Which, essentially, is everyone.

That’s why we should all be aware of how Germany’s elections went this weekend. To quote CNBC on the subject (since I’m hardly an expert on it):

The Christian Democratic Union and the allied Christian Social Union secured the largest share of votes in the German federal election on Sunday, according to exit polls from German broadcaster ZDF…

The CDU-CSU won 28.5% of votes, with the far-right AfD in second place with 20% and [current Chancellor Olaf] Scholz’s Social Democratic Party (SDP) coming in third with 16.5%, according to ZDF exit polls data.

That’s not very promising for the status quo in Germany, especially because the German populace turned out in apparent record numbers. In fact, Social Democratic Party General Secretary Matthias Miersch called it a “very bitter evening” and a “historic defeat.”

That’s not entirely surprising considering how the German economy hasn’t done anything impressive in five years now. The populace clearly and understandably wants a change.

It’s only a matter of how that change will manifest itself from here.

Stay tuned for my “reading the recession tea leaves” article later this week…

Regards,

Brad Thomas
Editor, Wide Moat Daily