3/3/2025

Good Morning.

Stephen Schwarzman, Ceo of Blackstone, took home over $1 B in 2024. The bulk of this payout came from dividends in his 20% stake in the firm. 

Rolls Royce Holdings is up 55% in the past 6 months. The Famous brand name is separate from the car producer and makes jet engines. The quality in its engines, growing demand, and strong earnings propelled the stock.

In today’s newsletter we will cover: 

• Markets

  • US Indices

  • Yields Decline 

  • Q4 Earnings Season

  • Consumer Confidence

  • Nvidia Earnings

• Private Credit ETF

• Canadian Banks preparing for credit losses 

• US Crypto Reserve Announcement

• PCE Report

• What to look out for this week!

Markets 

• US Indices: The S&P 500 and NASDAQ declined for the second consecutive week amid renewed tariff threats and a pullback in technology stocks. The NASDAQ dropped approximately 3.5% over the week, while the S&P 500 slipped 1.0%. In contrast, the Dow stood out, posting a 1.0% gain.

• Yields Decline: U.S. government bond yields dropped to their lowest levels in nearly three months as investors reacted to concerning economic data. The 10-year U.S. Treasury yield ended Friday at approximately 4.19%, down from 4.42% the previous week and well below its mid-January peak of 4.80%.

• Q4 Earnings Season: S&P 500 companies reported an average earnings increase of 17.8% in the recently concluded fourth-quarter earnings season, compared to the same period a year ago, according to FactSet data. This marks the strongest growth since Q4 2021 and significantly surpasses the 11.8% growth analysts had initially projected. Among all 11 sectors, financials led the way with a remarkable 56.0% earnings gain.

• Consumer Confidence: U.S. stocks declined on Tuesday after consumer confidence saw its sharpest monthly drop in three and a half years. The Conference Board's Consumer Confidence Index fell to 98.3, down from a revised 105.0 in January and significantly below economists' expectations. Survey respondents pointed to renewed concerns over inflation risks as a key factor behind the decline.

  • The Consumer Confidence Index (CCI) is an economic indicator that measures the optimism or pessimism of consumers regarding the state of the economy. It is based on a survey that assesses consumer attitudes toward current and future economic conditions, including business conditions, employment prospects, and income expectations.

  • CCI is a leading indicator, which helps predict future economic activity. Stronger consumer confidence Indicates higher consumer spending, which drives economic growth, while weaker consumer confidence suggests consumers may cut back on spending, signaling potential economic trouble.

Nvidia Earnings: 

• Nvidia (NVDA) continues to ride the AI wave, delivering another blockbuster quarter in Q4 FY2025, with revenue surging 78% YoY to $39.3 billion. Data center sales led the charge, skyrocketing 93% YoY to $35.6 billion, fueled by massive AI investments from cloud giants like Meta, Google, Microsoft, and Amazon. The rollout of Blackwell GPUs, Nvidia’s next-generation AI chips, played a key role in this surge, already contributing $11 billion in Q4 sales.

• While gaming revenue declined 11% YoY to $2.5 billion, due to Nvidia prioritizing AI chip production, the company remains incredibly profitable. Net income surged 80% YoY to $22.1 billion, with gross margins holding strong at 73%, underscoring Nvidia’s dominant pricing power in AI hardware.

• Looking ahead, Nvidia expects Q1 FY2026 revenue to reach $43 billion, exceeding analyst expectations and reinforcing strong demand for AI infrastructure. CEO Jensen Huang highlighted that AI adoption is accelerating across industries, with Nvidia expanding into enterprise AI, automotive (self-driving platforms grew 103% YoY), and even AI-powered gaming with its upcoming GeForce RTX 50-series GPUs.

• With AI-driven investments showing no signs of slowing and Blackwell GPUs ramping up production, Nvidia remains at the forefront of the AI revolution. Investors and analysts remain bullish, as the company continues to deliver unprecedented growth and profitability in an era defined by AI acceleration.

State Street and Apollo Private Credit ETF

• State Street and Apollo have established the first private credit etf.

• Etfs require liquidity. For example a normal fixed income etf would buy bonds on the public market and be able to sell them back there. Private credit however does no trade on the public markets. With this partnership Apollo has agreed to sell assets, illiquid credit that it originates, to State Street and buy them back. This creates a market that is supposed to allow the etf draw on and draw down investments. 

• While the etf has been trading since Thursday, regulators have serious concerns. The main concern is whether this partnership is providing true liquidity. Apollo is the sole buyer, seller, and responsible for pricing the assets. There are concerns on how much Apollo is required to buy each day for redemptions. 

• In addition the etf will likely have to remove Apollo's name as regulators believe it is misleading to investors. 

• Despite regulatory concerns this is a groundbreaking product that other asset managers are closely watching as they consider launching similar products.

• The actively managed etf will invest 80% of its assets in investment grade credit. Private credit has historically outperformed similar fixed income markets. Investors would use this product in bid to reduce volatility and seek higher yields. The expense ratio will be .70%. 

• The ETF is named SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV) and currently has $50 M under management.

Canadian banks are preparing for worsening trade relations  

• Major Canadian banks recently have been building out their American business. As a major U.S. trade partner Canadian banks utilized growth in business to expand their operations and involvement in the U.S. economy. However, looming Trump tariffs have potentially slowed down this accelerated effort. 

• The banking industry as a whole does not know what to make of tariffs with mixed rhetoric and shifting messages coming from White House.

• With potential tariffs looming on March 4th, Canadian banks are preparing for shrinking economic growth, exchange rate volatility, credit losses, and more. 

• “Clients across the board, across the country are feeling a little more tentative in terms of commitments going forward until there’s more certainty” (CEO Canadian Imperial Bank of Commerce)

• The six largest Canadian banks have made provisions for C$5.2 billion in credit losses.

• “There’s no doubt that tariff and trade risks are clouding the economic outlook” (TD CEO)

• These Canadian banks have significant investment in the U.S. however these credit losses provisions are because of concerns of how it would affect its domestic lending. Tariffs could significantly hamper growth and result in delinquencies. 

(WSJ)

Price Consumption Expenditure

• The latest PCE report for January 2025 reveals a nuanced picture of the U.S. economy, highlighting shifts in consumer spending, personal income, and inflation.

• Personal income saw a notable increase of 0.9% ($221.9 billion), primarily driven by strong wage gains, higher dividend growth, and one-time bump in Social Security payments at the start of the year. Disposable personal income (DPI), which reflects earnings after taxes, also rose by 0.9% ($194.3 billion), indicating that individuals had more funds available for savings or spending.

• Despite the increase in income, consumer spending showed a slight decline, decreasing by 0.2% ($30.7 billion) in January. This drop was primarily due to a significant reduction in goods spending ($76.7 billion), partially offset by an increase in services spending ($46.0 billion).

• On the inflation front, the PCE price index increased by 0.3% for the month, bringing the year-over-year inflation rate to 2.5%, slightly down from December's 2.6%. The core PCE price index, which excludes food and energy costs, also rose by 0.3% in January but showed a further cooling to 2.6% year-over-year, down from 2.9% in December. 

• The 0.2% nominal decline in consumer spending, or 0.5% adjusted for inflation, signals weakening economic momentum. A sustained drop in real spending may indicate declining consumer confidence and demand, slowing overall growth. If the trend persists, businesses could face lower revenues, leading to hiring freezes or job cuts. While reduced spending may temporarily ease inflation, it also raises concerns about broader economic stability. Moreover, inflation remains fragile and could rise as new tariffs take effect in the coming months. The Fed must carefully navigate policy decisions to support growth without prematurely easing rates and reigniting inflation.

US Crypto Reserve Announcement

• ​In a recent series of posts on his social media platform, Truth Social, President Donald Trump announced the establishment of a U.S. Crypto Strategic Reserve, signaling a significant policy shift toward embracing digital assets. The reserve is set to include major cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Solana (SOL), and Cardano (ADA). By including Solana (SOL), Ripple (XRP), and Cardano (ADA)—all developed by U.S.-based entities—alongside global leaders Bitcoin (BTC) and Ethereum (ETH), Trump emphasized his commitment to positioning the United States as a leader in the crypto industry, stating, "I will make sure the U.S. is the Crypto Capital of the World."

• The announcement had an immediate and substantial impact on the cryptocurrency market. Updated at 6:00pm EST, Bitcoin's price surged by approximately 10%, reaching over $94,000, while Ethereum saw a 12% increase to around $2,500. US-developed crypto experienced even more pronounced gains: XRP jumped 33% to $2.90, Solana rose 25% to $177, and Cardano skyrocketed nearly 60% to $1.07.

• This move represents a notable departure from the previous administration's regulatory stance on digital assets. Under former President Joe Biden, the industry faced increased scrutiny aimed at protecting consumers from potential fraud and financial crimes. In contrast, President Trump's initiative to create a Crypto Strategic Reserve indicates a more supportive approach, potentially accelerating institutional adoption and providing greater regulatory clarity. The administration's actions, including the rescission of certain regulatory measures, suggest a broader acceptance and strategic incorporation of digital assets by the U.S. government.

What To Look Out For This Week!

Tuesday: President Trump will address congress 

Thursday: Initial jobless claims

Friday: U.S. Employment report

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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