3/24/2025

Good Morning.

500 SEC employees have agreed to take a $50,000 buyout offer designed to reduce headcount and cut expenses. The SEC plays a critical role in enforcing fair market practices and regulations.  A 10% reduction in headcount has raised concerns about the agency's ability to meet its mission. Additionally, it's important to note that the SEC, who regularly utilizes fees to enforce rules, has historically made more fees than operating expenses. 

The U.S. Dollar has slid 4.5% YTD, the largest drop in this short period of time since the 2008 financial crisis.

(U.S. Dollar Index YTD Bloomberg)

Part of the “Trump Trade” was bullish bets on the dollar backed by the belief that a pro-business agenda, strong economic growth and reduced rate cuts would boost the dollar. However, a diminishing U.S. economic growth, outlook, tariffs, and rate cuts on the table, which are a primary driver of the U.S. dollar, have changed things. This has led to a new outlook on the U.S. dollar; markets have become bearish on the U.S. dollar.

$3.1 B in bets will be placed in the March Madness tournament. It's important to know that NIL allows college athletes to monetize their “Name, Image, and Likeness” through sponsors and other compensation methods. During this tournament, athletes who grow a popular following could revive lucrative NIL deals.

In today’s newsletter we will cover: 

• Markets

  • U.S. stock indexes

  • Tech Trouble

  • Europe’s YTD Dominance

  • Retail Setback

  • Buybacks Expand

• Deal of the week: Walgreens $10 B Equity Acquisition

• CPI Insight: Inflation Softens Despite Tariffs—Is a Fed Pivot Coming?

• Crypto Insight: The New Buyer of U.S. Treasuries Amid China's Geopolitical Strategy

• What to look out for this week!

Markets 

• U.S. stock indexes fluctuated between modest daily gains and losses throughout the week, ultimately ending slightly higher after recent declines pushed the S&P 500 into correction territory the week prior. By Friday’s close, the S&P 500 had risen 0.5% for the week, breaking a four-week losing streak.

• Tech Trouble: The information technology sector, along with many of the Magnificent Seven stocks that have driven U.S. market gains in recent years, slightly underperformed the broader market last week, continuing a challenging year-to-date stretch. As of the latest close, the tech sector was down over 9% for the year, a sharp reversal from its nearly 37% gain in 2024.

• Europe’s YTD Dominance: A key European stock index ended the week nearly flat but continued to outperform its U.S. counterpart by a wide margin. The index recorded a slight weekly gain, bringing its year-to-date return to around 14%, compared to the S&P 500’s –3% performance.

• Retail Setback: U.S. retail sales disappointed for the second straight month, falling short of economists’ expectations. February sales rose just 0.2%, well below the anticipated 0.6% gain, according to Monday’s government report. Adding to the weak data, January’s previously reported 0.9% decline was revised even lower to a 1.2% drop.

• Buybacks Expand: U.S. companies ramped up share repurchases in 2024, spending nearly 19% more than in the previous year. S&P 500 firms bought back a record $943 billion worth of shares, up from $795 billion in 2023, according to S&P Dow Jones Indices. On a quarterly basis, buybacks increased 7% in Q4 compared to Q3.

Deal of the week: Walgreens $10 B Equity acquisition

• Walgreens Boots Alliance has agreed to be acquired by private equity firm Sycamore Partners, at an equity value of $10 B. The company has $8 B in debt and $22 B in lease obligations. The estimated total value of the acquisition is $23.7 B.

• At a purchase price of $11.45 per share that represents a 8% premium when the deal was announced on March 6th.

• The pharmacy’s stock has suffered substantial losses. Online competition, theft, rising costs, inflation-wary customers, and a failed healthcare investment have been significant challenges to the company. The company even declared the end to a longstanding quarterly dividend to preserve cash holdings.

(Walgreens stock: WBA 5Y)

• Financing: 83.4% of the financing for Sycamore’s buyout is debt.

• The acquisition has not yet happened but another bid is unlikely which would mean it would go into effect the fourth quarter of 2025.

• Sycamore is utilizing the services of UBS, Goldman Sachs, and JP Morgan Chase as financial advisors. 

• Because talks are private there is not much clear information. The scale and complexity of the acquisition have led to talks of creative solutions. ABL has been floated as a unique option, using the inventory as an asset against which to lend. In addition, PC shops like HPS and Ares have shown interest. There is a lot of money set aside that credit investors need to put to work and PC managers will likely continue to show interest.

• Taking the company private could lead to refinancing of debt, selling assets, and more store closures. No longer under the scrutiny of Wall Street, Walgreens will have greater flexibility.

CPI Insight: Inflation Softens Despite Tariffs—Is a Fed Pivot Coming?

• The February 2025 Consumer Price Index (CPI) report indicates that inflation is decreasing faster than expected, with CPI rising 2.8% year-over-year—below forecasts—while Core CPI increased 3.1%. Month-over-month inflation cooled significantly, led by stabilizing shelter costs and mixed energy prices. Egg prices surged due to supply shocks, but leading indicators, such as Truflation and gas price trends, suggest further disinflation ahead. With inflation easing, market sentiment favors Federal Reserve rate cuts, likely beginning in mid-2025. Despite concerns over new tariffs, the report shows no immediate inflationary impact, though lagging effects remain a risk. Federal Reserve Chair Jerome Powell acknowledged progress in curbing inflation but stressed the need for further data before policy adjustments. As the March 2025 CPI report approaches in April, the Fed remains cautious, balancing inflation trends, economic uncertainty, and potential monetary easing decisions.

Full report in PDF: CPI Insight (February 2025) 

Crypto Insight: The New Buyer of U.S. Treasuries Amid China's Geopolitical Strategy

(Foreign Nations holdings of U.S. Treasuries - China is marked by red)

Source: Macro Micro

• China has reduced its U.S. Treasury holdings by $57 billion in 2024, continuing a long-term divestment trend totaling $550 billion since 2011, driven by geopolitical risks and a shift toward assets like gold. Meanwhile, stablecoin issuers such as Tether and Circle are emerging as significant Treasury buyers, with Tether holding over $113 billion and Circle $44.57 billion in Treasury-related assets. As global demand for stablecoins rises, these issuers provide liquidity to U.S. debt markets, stabilizing Treasury demand while reinforcing the dollar’s dominance. 99% of stablecoins are USD-pegged and widely used in digital finance and international transactions. Their role in enabling affordable remittances in economies with high inflation and devalued currencies further entrenches the dollar as the global digital currency. 

• However, as these issuers accumulate Treasuries, they function like shadow financial institutions, prompting regulatory scrutiny over reserve transparency and systemic risks. Despite these challenges, stablecoins are reshaping global finance by supporting U.S. debt markets and solidifying the dollar’s dominance in both digital and traditional economies.

Full report in PDF: Stablecoins and U.S. Treasuries: A New Financial Paradigm 

What To Look Out For This Week!

Friday: Personal Consumption Expenditure (PCE) February 

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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