2/18/2025

Good Morning.

We hope you had a good Presidents Day!

Fed Chair Powell addressed Congress in a semi-annual address stating “with our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance.” In the address Powell remained committed to keeping rates at the current 4.25%-4.50%. In addition he reaffirmed to Congress that the Fed would remain independent and respond to Trump policy according to the economy's needs. 

One dozen eggs hit a record high, reaching an average of $4.95 and as high as $9 in more dense cities. A devastating bird flu has killed over 21 million chickens, leading to massive supply constraints.

CPI for the month of January rose more than expected, led by increases in groceries, gas, housing, and prescription drugs.

In today’s newsletter we will cover: 

• Markets

  • Indices post gains 

  • European Equity Comeback

  • Precious Metals Rally

  • Strong Earnings Season

• Morgan Stanley selling X debt

• Digital Assets Weekly Summary

• CPI Insight

• What to look out for this week!

Markets 

• The S&P 500, NASDAQ, DJIA posted weekly gains, rebounding after two consecutive weeks of declines. The S&P 500 closed just four points below its record high from three weeks ago, while the NASDAQ and Dow remained about a percentage point away from their all-time peaks.

• European Equity Comeback: After trailing the U.S. equity market in 2024 and much of the past decade, European stocks have surged ahead in 2025. As of Friday’s close, a key European index had gained over 12% year to date, significantly outpacing the S&P 500’s roughly 4% increase.

• Precious Metals Rally: Gold surged to a record high on Friday amid volatile metals trading, briefly touching $2,964 before pulling back in the afternoon. Silver also rallied, briefly hitting $34 per ounce—its highest level in over a decade.

^ YTD Gold Day Close Price 

^  10 Year Silver Spot Close Price 

• Strong Earnings Season: With earnings season winding down, corporate profits have continued to surpass expectations. As of Friday, analysts projected fourth-quarter net income to grow 16.9% year-over-year, based on results from three-quarters of S&P 500 companies and estimates for those yet to report. This marks a significant jump from the 11.8% growth forecasted before earnings season began.

Morgan Stanley selling X debt

• In 2022 when Elon Musk bought Twitter he and a consortium of investors put up $33.5B in equity. A group of banks led by Morgan Stanley financed an additional $13B.

• These loans were written in a low interest rates era and the banks at first struggled to get them off their books. The banks have tried to find a way to offload the debt for two years. Increased confidence in Musk from his relationship with Trump, an embrace of AI, and a demand for transactions have changed the banks’ fortunes and made the debt more attractive to investors. In less than a month there have been three major sales of X debt from the banks that provided the financing. 

• These lenders originally expected to take losses in order to sell the debt but recent sales have almost sold at par, and in the most recent $3B sale investors paid face value and will be receiving a 9.5% interest rate. 

• This is an incredible turn of events that leaves financiers with only $1.3B of X debt left to sell. Originally banks had been preparing to take major losses, potentially selling 60 cents on the dollar.

Digital Assets Weekly Summary

1. Bitcoin Strategic Reserve Tracker Update: On February 10, 2025, Florida Senator Joe Gruters introduced S0550, authorizing the Chief Financial Officer (CFO) to invest up to 10% of state funds in Bitcoin, including assets from the General Revenue Fund, Budget Stabilization Fund, trust funds, and agency funds. The bill mirrors Senate Bill 550. This week, New York, Arizona, Michigan, and Georgia proposed similar state Bitcoin strategic reserve funds. As of February 16, 20 states have active Bitcoin reserve proposals, while Pennsylvania, North Dakota, and Wyoming have rejected such measures.

2. Coinbase & Robinhood: Positive Operating Outlook: Following Bitcoin’s bullish parabolic surge in late 2024 and early 2025, Coinbase (COIN) and Robinhood (HOOD) have reported strong financial performance. The table below summarizes their key positive results:

3. Notable Insights: Bitcoin’s Fourth Cycle: Institutional Strength, Retail FOMO, and the Impending Parabolic Surge: Bitcoin’s fourth cycle (2023–2026) is in a consolidation phase as institutional and corporate adoption grows. Major firms and pension funds continue accumulating Bitcoin, while financial institutions expand Bitcoin ETF offerings. More companies are adopting Bitcoin as a treasury asset. Regulatory oversight from the SEC and CFTC is strengthening, along with the U.S. government and several states considering Bitcoin reserves. Despite strong fundamentals, Bitcoin remains in accumulation, mirroring past cycles where adoption preceded rallies. Historically, price peaks occur around 500 days post-halving, suggesting further upside. A major catalyst, such as a Federal Reserve rate cut or breakthrough regulation, is needed to trigger retail FOMO. Investors who see consolidation as weakness risk missing the final surge. If trends continue, Bitcoin is set for a breakout fueled by FOMO retail, institutional strength, corporate adoption, and regulatory progress.

CPI Insight

• U.S. CPI rose to 3% YoY in January, but this is not due to recent tariffs on Canada, Mexico, and China, and the consensus is that this is not a major concern. CPI remains on a downward trajectory, with rate cuts still expected later this year.

• President Trump signed three tariff-related executive orders on February 1, 2025, imposing a 10% tariff on all Chinese imports (effective February 4) while delaying tariffs on Canada and Mexico for 30 days. Other tariffs won’t take effect until March or April. As a result, tariffs are unrelated to this CPI increase.

• While inflation is easing, the pace has slowed. The housing index, accounting for a third of the CPI, rose 0.4% in January, but housing CPI typically lags behind other economic indicators, making this increase less concerning. Medical care commodities (+1.2%) and hospital services (+0.9%) also saw gains, while seasonal factors contributed to higher airline fares and used car prices. However, many consumer goods and services saw price declines. Moreover, in general, companies usually raise prices of goods and services in January. Therefore, we can be confident that we are still in the disinflation trend, and if this continues, we can expect rate cuts later in the year.

• The U.S. market showed a muted reaction to the increase on Wednesday, February 12. The S&P 500 dipped 0.27% to 6,051.97, while the Dow Jones fell 225.09 points (-0.5%) to 44,368.56. Meanwhile, the Nasdaq Composite edged up 0.03% to close at 19,649.95.

• In conclusion, the recent CPI increase is not linked to new tariffs and remains within the broader disinflation trend. Although inflation is easing at a slower pace, key drivers such as housing CPI typically lag, making the rise less concerning. The U.S. market responded mildly to the inflation data, reinforcing expectations that the Federal Reserve will proceed with rate cuts later this year.

What To Look Out For This Week!

Monday: Markets closed for Presidents Day

Wednesday: HSBC reports earnings

Thursday: Initial jobless claims; Walmart and Rivian report earnings

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: Willam Le

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