2/24/2025

Good Morning.

Treasury Secretary Bessent stated that U.S. debt sales will not increase sales of longer duration bonds yet. Treasury bills are short term notes the U.S. sells to raise money and has increasingly become a larger portion of U.S. debt. In tandem with the Fed's Quantitative Tightening, the Fed selling its securities, the path to increasing long term debt issuance has been difficult. This practice is potentially an effect of the market demanding shorter terms due to inflation and as a result could be preventing longer term debt rates from rising.

European defense stocks surged on the news Europe will increase defense spending as the U.S. singles a growing disinterest in defending Europe. The STOXX index of European Defense companies has risen 33.87% in the past 6 months. 

BlackRock is positioning itself to become a mega player in private markets. High profile purchases have led to a 279% increase in alternatives under management since 2014 compared to 157% increase in equity, its predominant business. (Bloomberg)

Structured Finance Conference in Vegas in full swing. Over 10,000 attendees will be participating in the largest capital markets conference in the world for three days.

In today’s newsletter we will cover: 

• Markets

  • U.S. Equities 

  • 2025 Mag 7 Underperforms 

  • Walmart Earnings 

  • U.S. Mortgage Rates

• Deal of the week: Blackstone sells PE firm

• Worldwide Rate Cuts 

• Bybit Hit by $1.5B Crypto Heist

• What to look out for this week!

Markets 

• US Equities: Major indexes declined during the holiday-shortened week. After markets remained closed Monday for Presidents’ Day, stocks opened higher on Tuesday, pushing the S&P 500 to record highs on both Tuesday and Wednesday. However, sharp losses in the latter half of the week wiped out those early gains, leaving major indexes in the red.

• 2025 Mag 7 Underperforms: In 2024, mega-cap technology stocks were the primary drivers of the broader market rally, particularly in the first half of the year. The tech-heavy Nasdaq and the "Magnificent 7"—widely seen as the leaders of the artificial intelligence (AI) trade—significantly outperformed, contributing to over 50% of the S&P 500’s total returns. However, in 2025, the performance of these stocks has been more uneven. Only two of the seven have outpaced the S&P 500, while the group as a whole has lagged behind most other asset classes.

• Walmart shares were down over 9% for the week following earnings. Walmart topped earnings and revenue expectations for its fiscal fourth quarter but cautioned that profit growth will slow in the current fiscal year. CFO, John David Rainey, acknowledged that the company wouldn’t be “immune” to potential tariffs on Mexico and Canada. 

  • Meanwhile, the retailer saw strong growth in its e-commerce business and membership programs.

• The average 30 Year mortgage rate has been declining for the past five weeks. The average rate for a 30-year loan is 6.85%. Stable rates are a positive for home buyers who are wary of volatility. These high borrowing rates have contributed to a slow down in U.S. home sales.

Deal of the week: Blackstone sells First Eagle

• Blackstone has put First Eagle Investment Management up for sale. It is estimated to be being sold at a $4 B valuation. First Eagle is an asset manager that generates $500 in EBITDA. It has over $ 149 B in AUM that has significant investments in alternatives and credit. Blackstone is taking advantage of the increase in mergers and acquisitions in the asset management industry. Asset managers make money off a percentage fee of AUM and profit. This payment system has made increasing AUM a priority for asset managers. Morgan Stanley  is the lead Investment Bank in this sale. (Financial Times)

Bybit Hit by $1.5B Crypto Heist

• On Friday, February 21, 2025, Dubai-based cryptocurrency exchange Bybit experienced a significant security breach, resulting in the theft of approximately $1.5 billion worth of Ethereum. The incident occurred during a routine transfer from a cold wallet—an offline storage solution considered highly secure—to a warm wallet used for daily trading activities. Hackers exploited this process by manipulating the transaction, gaining control of the cold wallet, and transferring 401,000 Ethereum to an unidentified address.

• In response to the attack, Bybit's CEO, Ben Zhou, reassured users that the exchange remains solvent and that all client assets are fully backed on a one-to-one basis. He emphasized that the compromised wallet was an isolated case, with all other wallets remaining secure and operational. Despite a surge in withdrawal requests following the breach, Bybit has continued to process transactions, though some delays have been reported. The company is actively collaborating with blockchain forensic experts to trace the stolen funds and has initiated a recovery bounty program, offering up to 10% of the recovered amount to ethical hackers assisting in the effort.

• The Bybit hack, now the largest crypto heist by value at the time of occurrence, has highlighted the growing solidarity among cryptocurrency exchanges. Unlike the Mt. Gox incident in 2014, when a single exchange controlled over 70% of the market and its collapse caused widespread turmoil, today's decentralized market structure has allowed for a more resilient response. Major exchanges, including Binance, Bitget, and OKX, quickly collaborated to track and freeze stolen funds or lending liquidity, showcasing a level of industry cooperation previously unseen. This shift underscores how the crypto market has matured, with decentralization fostering greater transparency and collective security efforts. Bybit’s swift crisis management also reinforced confidence, with many praising CEO Ben Zhou as a rising leader in the space, drawing comparisons to Binance’s CZ. His call for improved transparency in third-party liquidation data, such as those provided by Coinglass, further emphasizes the industry's ongoing push for accountability and trust.

Worldwide Rate Cuts

• In the past two months, several major economies have implemented interest rate cuts, signaling a shift in monetary policy. On February 6, the Bank of England lowered rates to 4.5%, marking its third cut since August 2024, in response to slowing economic growth. The following day, India reduced its repo rate to 6.25%, its first cut in nearly five years, aiming to stimulate economic activity amid a projected slowdown and easing inflation. On February 18, Australia cut its benchmark rate for the first time since 2020, while New Zealand and Sweden continued their easing cycles with 50 bps and 25 bps cuts, respectively, after multiple reductions over the past year. In January 2025, the European Central Bank executed its fifth rate cut since last summer, maintaining its efforts to revive economic momentum. Meanwhile, the US and China held rates steady, while Japan took the opposite approach, raising rates for the first time in 17 years on February 20.

• The wave of interest rate cuts, particularly in countries that had maintained high rates for years, signals a response to slowing global growth, disinflationary pressures, and the need to support credit expansion. India’s cut reflects concerns over a softening economy and inflation stabilization within target, while the Bank of England's continued reductions highlight growing recessionary risks in the UK. Central banks that had previously prioritized controlling inflation, such as the ECB and Australia’s RBA, are now pivoting towards economic stimulus as price pressures ease. 

• As always, the recent wave of interest rate cuts is bullish for risk-on markets, as lower borrowing costs and increased liquidity encourage capital flows into stocks, crypto, and high-yield assets. However, monetary policy divergence—with the US and China holding rates steady while Japan tightens—could create currency volatility and uneven capital flows. In fact, these cuts are seen as reactive to economic weakness rather than proactive stimulus, risk sentiment may remain fragile, impacting the sustainability of market rallies.

What To Look Out For This Week!

Tuesday: Consumer Confidence for February, Bank of Nova Scotia earnings

Wednesday: New Home Sales January, Nvidia Earnings

Friday: PCE January

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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