3/31/2025

Good Morning.

President Trump is expected to announce new tariffs on April 2nd. Reciprocal tariffs would match what other countries charge on U.S. exports. Trump has labeled this as the “big one,” and markets are bracing for continued loss and volatility. Major U.S. trading partners will likely retaliate.

The U.S. Yield curve remains semi-inverted. A standard yield curve means that as tenure increases, so does the yield. The 1-month treasury bill, the shortest tenure, has a yield of 4.30% while the 10-year U.S. treasury bond, an important market and economic indicator, has a yield of 4.25%, 5 basis points lower. As duration increases, the yield curve becomes normal with yields increasing. The current yield curve shows investors are anticipating more uncertainty and volatility now, requiring higher yields to take on this risk. 

(U.S. Treasury yield)

In today’s newsletter we will cover: 

• Markets

  • Midweek Reversal 

  • Growth VS. Value

  • Gold Continues to Outperform

  • Upcoming Jobs Report 

• Deal of the week: $6.1 B Acquisition of Boston Celtics

• Developing a relationship between banks and direct lenders

• Sticky Prices, Soft Growth: Why Markets Fell and What Comes Next

• What to look out for this week!

Markets 

• Midweek Reversal: After recording gains on Monday and Tuesday, the major U.S. stock indexes fell over the next three days, ending the week with overall declines ranging from approximately 1% to nearly 3%. For the S&P 500, it marked the fifth negative outcome in six weeks.

5 min - 5 Day GP of Major Indices (Bloomberg)

• Growth VS. Value: A U.S. large-cap growth stock index significantly underperformed its value counterpart, further extending the value equity style’s year-to-date lead after growth’s market dominance in 2024. The growth index fell about 2.6% for the week, while the value index dipped just 0.4%. Year to date, the growth index was down 10.0%, compared to a 1.2% gain for the value index.

• Gold Continues to Outperform: Gold prices rose for the fourth consecutive week, continuing a year-to-date rally that temporarily pushed the precious metal’s price above the $3,100-per-ounce mark for the first time. By Friday afternoon, gold was trading at around $3,116, representing a year-to-date increase of approximately 17%.

Gold VS S&P 500 YTD (Bloomberg) 

• Upcoming Jobs Report: The next monthly labor market report, scheduled for release on Friday, will reveal whether the moderate slowdown in job growth observed during the first two months of 2025 continued into March. In February, the economy added 151,000 jobs, a modest increase from 125,000 in January but still significantly lower than the job gains recorded in the final two months of 2024.

Deal of the week: $6.1 B Acquisition of Boston Celtics

• An investment group led by William Chisholm is purchasing the storied Boston Celtics franchise for $6.1 B. This sale price is the highest ever for a U.S. sports team. U.S. sports team valuations are soaring as the business grows and increased demand from private equity.

• The Grousbeck family bought the Celtics in 2002 for $360M, representing an IRR of 14.37% in a buy-and-hold scenario. This is a conservative estimate because it does not consider cash flows, tax advantages, and other sources of revenue. 

• Financing: The deal is private, and not all information has been disclosed. It was likely funded with a combination of private capital and debt. William Chiholm, founder of the private equity firm STG, and other investors are contributing equity capital. While this is not a formal private equity buyout, it is likely following a similar framework. Sixth Street Partners is said to contribute more than $1 B in the deal. 

• Use of Team Cash Flows: The Celtics' operating income and broadcast rights revenues could help service any debt used. NBA franchises tend to have stable and growing cash flows, making them attractive for a leveraged buyout model.

• Goldman Sachs was the sole financial advisor, and if the deal is approved by the NBA will go through in the summer.

Developing a relationship between banks and nonbank lenders

• A major factor attributed to growth in private credit is a decline in lending from U.S. banks after increased regulation post-2008. Non-bank lenders have stepped in to meet the demand from borrowers who need financing that traditional banks can't or don't have the appetite to provide. The firms of the likes of Apollo, Blackstone, and Ares have become major players in the $1.6 T private credit market, a large portion of which is direct lending. Nonbank lenders who have to abide by fewer regulations have greater flexibility, and their increased lending efforts have competed against traditional banks. 

• Banks are increasingly developing partnerships with nonbank lenders to capture growth in this market. Notable relationships include:

  • Citi and Apollo Global Management: $25 billion in credit to support deals 

  • Wells Fargo and Centerbridge Partners:  $5 billion private credit fund

  • ATLAS SP and BNP Paribas: financing commitment of $5 billion

  • Goldman Sachs Capital Solutions Group: works with institutional investors in funding loans rather than competing with private credit managers. 

• Bank lending to non-depository financial institutions has grown rapidly. This lending activity from banks is to a variety of strategies, with a large portion being allocated to nonbank lending efforts. 

• Banks provide financing to Private credit managers. These managers can use the capital to originate loans and earn a higher yield than the interest they are paying on the loan from the bank. A common strategy is to use the loans that managers originate as collateral.

• Using a variety of innovative financing solutions, such as direct loans, asset-based lending, and revolving credit facilities, banks and non-bank lenders can work together.

• As demand from investors and borrowers for nonbank lending has increased, financiers and private credit managers, whose business models at first glance seem competitive, have joined forces.

Sticky Prices, Soft Growth: Why Markets Fell and What Comes Next

The February 2025 Personal Consumption Expenditures (PCE) report showed inflation holding steady, though with some underlying pressure. Core PCE rose 2.8% year-over-year and 0.4% month-over-month—slightly above expectations—while headline PCE remained flat at 2.5% annually. These figures, combined with a significant drop in consumer sentiment (University of Michigan Index fell to 57.0), rattled markets on March 28. The S&P 500 dropped 2%, with tech and consumer discretionary sectors hit hardest. While some interpreted the sell-off as a reaction to sticky inflation and renewed fears of a hawkish Fed, others pointed to deeper concerns surrounding newly announced tariffs. President Trump’s 25% tariff on auto imports, and the prospect of broader trade measures, raised fears of policy-driven inflation and global economic strain.

Despite the cooling of rate cut expectations in the short term, growing signs of economic weakness suggest the door remains open to monetary easing later this year. The Atlanta Fed’s GDPNow model sharply revised Q1 2025 growth down to -2.8%, indicating the potential for a technical recession. With wholesale inflation stalled and most categories in the PCE report stable outside of a few nondurable goods and services, the February inflation uptick may prove transitory. If disinflation resumes and the labor market weakens, the Federal Reserve could shift course, cutting rates not in response to inflation easing—but to cushion an economy at risk of contraction. Together, these crosscurrents underscore a market grappling with both data uncertainty and policy unpredictability.

Full report: Sticky Prices, Soft Growth: Why Markets Fell and What Comes Next

What To Look Out For This Week!

Thursday: Initial jobless claims, U.S. trade deficit (February)

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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