5/19/2025

Good Morning.

We are thrilled to deliver the fifty-second consecutive issue, marking a full year of publication! This past year has been marked by market volatility, offering us an incredible opportunity to deepen our understanding and immerse ourselves in the world of finance. We have been hard at work finishing our sophomore year at Bucknell University where we both are studying Finance looking to enter the financial services. We are so thankful for you reading our work and we have some exciting plans in store for this next chapter.

DEBT!!! - Moody’s downgraded U.S. debt. Moody’s is one of the three largest rating agencies that determine credit scores. As one of the three major credit rating agencies, Moody’s is crucial in determining sovereign credit ratings. These ratings influence the cost of borrowing, as creditors use them to assess the safety and risk of their investments in U.S. government bonds. Previously rated Aaa, the highest possible rating, it has now been revised to Aa1, one notch down. Moody's cited increasing fiscal deficits and rising borrowing costs in this revision. This downgrade is in line with the other two rating agencies, S&P and Fitch, who both had already made similar downgrades. This new rating has stripped the U.S. of its last top credit rating.

• “While we recognize the US’ significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,” (Moody’s)

• Market reaction: The sheer scale of U.S. Treasuries makes it difficult to predict how markets will react. It’s likely that investors have already priced in the ballooning U.S. debt, meaning this official downgrade may not have an immediate or significant market impact. While Moody’s revision may not come as a surprise, it is certainly a warning bell, signaling growing concerns over the rising U.S. deficit.

Keep an eye on U.S. corporate credit spreads. The spread is the difference in yield of U.S. investment-grade corporate bonds over U.S. Treasury securities of similar maturity. The U.S. investment-grade corporate bond market is estimated to be around $8 trillion. The spread represents the cost of borrowing for U.S. companies but is also a key indicator of credit investor sentiment. Spreads remain tight at 94 basis points, according to ICE BofA US Corporate Index. U.S. companies are projecting weaker growth which in combination with overall declining sentiment could cause this spread to widen. 

(Fed ST Louis)

President Trump has paused his plan to create a U.S. sovereign wealth fund. “I’d rather pay the debt off and then do the fund after the debt’s paid off,”

Saks, the luxury retailer, issued $2.2 billion in bonds to fund the acquisition of Rival Neiman Marcus in December. Months later, the bonds have plunged and are trading at 46 cents on the dollar. Retail in particular is experiencing turmoil from tariffs. In tandem with priming, an aggressive strategy that strips creditors of their payment priority and collateral has caused these bonds to suffer. Creditors and Saks have both hired Investment Bankers as they discuss new financing and creditors' claims.

(Bloomberg)

In today’s newsletter, we will cover: 

• Markets

  • Rebound Resumes

  • Trade Progress

  • Bear-to-Bull NASDAQ

  • Volatility Eases

  • Gold Retreats

  • Consumer Anxiety

• CPI Update (Reference Time: April, 2025)

• Alts in your 401k?!

• U.S.–China Tariff Agreement: A Temporary Pause in Trade Tensions

• What to look out for this week!

Markets 

For a full breakdown of each metric and why it matters, CLICK HERE.

Rebound Resumes: The S&P 500 gained over 5% this week, leading a sharp recovery across major U.S. indexes after last week’s modest pullback. It marks the fourth weekly gain in the past six, as equities continue to claw back ground lost during the February-to-April drawdown.

Trade Progress
The majority of this week’s market gains came on Monday, driven by renewed momentum in the U.S.–China trade negotiations. Both sides agreed to a 90-day rollback on several recently imposed tariffs, creating room for further discussions aimed at securing a longer-term agreement.

Bear-to-Bull NASDAQ

After a stretch of heightened volatility, the NASDAQ officially entered a bull market on Monday—just six weeks after dipping into a brief bear phase. A 4% surge pushed the index more than 20% above its April 8 low. By Friday, it closed within 5% of its all-time high from December 16, 2024.

Volatility Eases

The Cboe Volatility Index (VIX), which tracks expected short-term market turbulence, declined for the seventh straight week, returning to levels last seen at the end of 2024. As of Friday, the VIX was down roughly 67% from its April 8 peak, when tariff-related uncertainty sent volatility sharply higher.

Gold Retreats

The price of gold fell for the third week out of the past four, marking a pause in a year-to-date rally that pushed the precious metal to a record high in April. Gold was trading around $3,200 per ounce on Friday afternoon, down nearly 5% for the week and well below its record of more than $3,400 set less than four weeks earlier. 

Consumer Anxiety
U.S. consumer sentiment declined for the fifth straight month, hitting its lowest level in nearly three years. The University of Michigan’s preliminary May reading came in at 50.8—down from 52.2 in April and below economists’ expectations for a rebound.

CPI Update (Reference Time: April, 2025)

U.S. consumer prices rose 2.3% in April from a year earlier, slightly below the expected 2.4% and down from March’s 2.4%. Core CPI held at 2.8%, matching forecasts. On a monthly basis, prices increased 0.2% in April after a 0.1% decline in March.

Although the data suggests overall inflation pressures remain contained, largely due to a notable decline in energy prices, the persistence of underlying inflation, particularly in core categories like “All items less food and energy”, remains a concern. This indicates that disinflation progress is uneven, and it would be premature to overlook the stickiness of core inflation pressures.

(Bureau of Labor Statistics)

(Bureau of Labor Statistics)

On a yearly basis, the most significant movement in the CPI basket was the sharp decline in the Energy category. As of 8:45 p.m. on Sunday, May 18, Brent crude settled at $65.38 per barrel and U.S. West Texas Intermediate (WTI) closed at $62.52, the lowest levels since 2021. The decline reflects increased OPEC+ output, including a 411,000-barrel-per-day boost announced in early May, and rising concerns over global economic growth. Ongoing tariff uncertainty has further weighed on prices by weakening trade and demand expectations. This decline in oil prices has contributed to an 11.5% drop in Gasoline (all types) and an 11.8% decline in Fuel oil. As a result, Energy commodities, one of the two main components in the Energy category of the CPI basket, fell by 3.7% year-over-year.

(WSJ)

(WSJ)

On a monthly basis, every category in the CPI basket of goods and services saw a rebound in inflation, while food saw the opposite thanks to the steep drop in egg prices.

U.S. Eggs Price (Trading Economics)

Prices for tariff-exposed categories like furniture and appliances rose sharply, likely due to early impacts of new levies. Apparel, despite being highly tariff-sensitive, remained stable—possibly due to high inventories and softening demand delaying price adjustments.

Overall, the April CPI report points to easing headline inflation, largely due to falling energy prices, while core inflation remains steady. However, the full impact of new tariffs may not yet be reflected, as many retailers are still drawing from pre-tariff inventories. As these inventories run down, the inflationary effects of higher import costs could become more visible. Close attention to the upcoming CPI reports will be essential to assess whether tariff-driven price pressures begin to accelerate across more consumer categories.

Alternative investment in your 401K with Empower?

• Alternative investment managers have grown their assets under management (AUM) by expanding existing funds and seeking new sources of capital. Nearly every firm is actively trying to tap into more capital, whether from institutional investors, high-net-worth individuals, and retail investors. The $12 trillion in American 401k accounts has been left untouched so far. 

• A 401(k) is a retirement savings plan that  employees contribute a portion of their salary to primarily into liquid, publicly traded assets like mutual funds, stocks, and bonds.

• Alternative asset managers have time again and again praised the diversification and higher returns of their investments. 401 k accounts have seemed to be the holy grail of this so-called untapped potential. 

• Empower, one of the largest U.S. retirement plan providers, manages over $1.8 trillion in assets.

• Empower will join forces with other firms to offer private investments in their retirement portfolios. This includes private credit, private equity, realestate, and more.

• “Apollo Global Management, Franklin Templeton, Partners Group, Goldman Sachs, Neuberger Berman, Pimco and Sagard will provide the investments (Bloomberg)

Note to the reader: This is a topic we’ve covered extensively and for good reason. Alternative asset managers have been rapidly expanding their offerings, and it increasingly appears that American retirement savings accounts are the next frontier. BlackRock’s entrance into alternative investments is one of many additional notable events we have discussed which further underscores this evolution. This shift marks a major evolution in how Americans save for retirement; potentially reshaping inflows into traditional equities, the business models of major financial institutions, and the broader investment landscape.

As this space continues to grow and shift, we’ll be closely following the developments and sharing insights on this important topic.

“But this notion of rethinking the product set, I believe to be the single biggest opportunity in front of us.” (Marc Rowan CEO of Apollo)

U.S.–China Tariff Agreement: A Temporary Pause in Trade Tensions

On May 12, 2025, the U.S. and China agreed to a 90-day tariff reduction to ease rising trade tensions. The U.S. cut tariffs on Chinese goods from 145% to 30%, while China reduced tariffs on U.S. imports from 125% to 10%. 

US Treasury Secretary Scott Bessent (R) and US Trade Representative Jamieson Greer hold a news conference in Geneva. Photo: Getty Images

The agreement follows a series of tariff escalations earlier this year that raised concerns about global economic stability. The 90-day reduction aims to give both sides a chance to negotiate a broader deal, but the short timeframe highlights the temporary nature of the truce, with tariffs set to return if talks stall.

Markets welcomed the pause, with global stocks rising, but the market should remain cautious. The limited duration and lack of a clear negotiation roadmap continue to fuel uncertainty in global trade.

What To Look Out For This Week

Monday (May 19)

• Earnings:

  • Palo Alto Networks (PANW) – Cybersecurity sector insights

  • Ryanair (RYAAY) – European travel demand trends

  • XPeng (XPEV) – Electric vehicle market update

Tuesday (May 20)

• Earnings:

  • Home Depot (HD) – Home improvement retail performance

  • Trip.com (TCOM) – Travel sector recovery indicators

  • Ralph Lauren (RL) – Luxury retail trends

Wednesday (May 21)

• Earnings:

  • Lowe’s (LOW) – Home improvement sector comparison

  • Target (TGT) – Consumer spending patterns

  • Snowflake (SNOW) – Cloud computing and data analytics

  • TJX Companies (TJX) – Off-price retail dynamics

Thursday (May 22)

• Economic Data:
  

  • Initial Jobless Claims – Labor market health

  • S&P Global Flash PMI (May) – Manufacturing and services sector activity

  • April Existing Home Sales – Housing market trends

• Earnings:

  • Ross Stores (ROST) – Discount retail performance

  • Alibaba (BABA) – E-commerce and global trade insights

Friday (May 23)

• Economic Data:

  • April New Home Sales – Housing market supply and demand

• Federal Reserve Speakers:

  • Governor Michelle Bowman

  • New York Fed President John Williams

  • San Francisco Fed President Mary Daly

We are two college students on a mission to immerse ourselves in the financial industry. We are eager to learn more and make new connections. Our goal is to share exciting and informative content that provides a broad picture of current events and offers valuable insights.

Founders: Ben Banchik, Zachary Singer

Additional Contributors: William Le

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