4/21/2025

Good Morning.

UnitedHealth Group Inc. missed earnings for the first time in a decade, caused by a combination of regulatory changes and unforeseen increases in expenses. In its earnings forecast, it cut adjusted earnings per share from $30 to $26.5. The health care giant plunged 23% on Thursday and has not recovered its losses. Following the news, industry peers suffered losses as investors question UnitedHealth Group's struggles, not an isolated event that could affect the entire healthcare industry. 

President Trump has made it clear he is not pleased with Fed Chair Powell after the Federal Reserve decided to keep rates steady contrary to the President's wish for further rate cuts. Trump cited the European Central Bank's decision to cut rates as evidence for the Fed's failure.  He tweeted  “termination cannot come fast enough!” referring to the Fed Chair, and has stated his administration is studying possible methods to remove Powell before his term ends on May 15th, 2026. Monetary independence in the U.S. means the central bank is independent from the executive office, and historically, this has not been challenged. U.S. bond markets would likely react negatively further if signs of significant progress were made in removing Powell.

In today’s newsletter, we will cover: 

• Markets

  • Tariffs Continue to Loom on U.S. Equities

  • Dollar Weakens

  • Fed’s Balancing Act

  • Europe Cuts Rates Again

  • Gold’s Steady Surge

• Bank Earnings

• What to look out for this week!

Markets 

• Tariffs Continue to Loom on U.S. Equities: News of tariffs cast a shadow over quarterly earnings season, halting the strong momentum from the prior week. In the holiday-shortened trading week due to Good Friday, the S&P 500 slipped about 1.5%, while the Dow and NASDAQ each lost roughly 2.6%.

• Dollar Weakens: Rising trade tensions continued to weigh on the U.S. dollar, challenging its role as the world’s dominant reserve currency. The dollar weakened for the sixth time in seven weeks, sliding to a three-year low on Thursday—now down over 8% from its year-end 2024 level against a basket of major currencies.

  • The U.S. Dollar Index (USDX) indicates the general int'l value of the USD. The USDX does this by averaging the exchange rates between the USD and  major world currencies.  The ICE US computes this by using the rates supplied by some 500 banks. 

• Fed’s Balancing Act: Federal Reserve Chair Jerome Powell stated that the central bank will “wait for greater clarity” before making any interest rate moves. He cautioned that rising tariffs could lead to “higher inflation and slower growth,” creating a potentially “challenging scenario” for the Fed as it tries to balance its dual mandate of full employment and price stability. 

  • The next FOMC meeting will take place in early May. Fed futures indicate that no change will be made to the Fed Fund Rate. There is loose fiscal policy out of Washington, which makes it difficult for monetary to transition from contractionary to expansionary monetary policy. 

• Europe Cuts Rates Again: The European Central Bank delivered its seventh consecutive rate cut on Thursday, responding to sluggish economic growth across the continent. The decision comes as Europe boosts defense and infrastructure spending while navigating mounting trade tensions and tariff pressures.

• Gold’s Steady Surge: Gold extended its rally, rising for the sixth time in seven weeks and breaking above $3,300 per ounce for the first time, just a week after surpassing the $3,200 mark. By Friday, the precious metal was trading around $3,335, up over 25% year to date.

Bank Earnings

Earnings reports from the largest U.S. banks show booming trading revenue and generally strong earnings. While the economic backdrop continues to be questioned, these earnings do not reflect any negative changes and continue to show healthy consumers and businesses reflecting a strong banking sector. 

Goldman Sachs reported a 15% increase from the previous year. The firm's equities trading revenue reached a record $4.2 billion, up 27%. Fixed income trading and investment banking fees did not meet expectations. However, the bank's earnings are still one of its highest.

Bank of America reported a 2.9% increase in net interest income. The bank's equity trading revenue rose, marking the 12th consecutive quarter of growth in this segment. 

Citigroup beat analyst expectations, driven by an increase in equity trading revenue. The bank's wealth management division also saw a 24% increase in revenue, a key vertical to its growth strategy.

Wells Fargo had a decline in net interest income, and its shares declined 3.6%.

“My general message to people is to go slow and take a pause here until we have more clarity.” (David Solomon)

Bank executives are all pushing a similar message that they believe there is increased volatility and have downgraded U.S. economic growth. However, they remain optimistic that growth will continue and certain segments will experience revitalization, particularly M&A. Banks remain risk-off while volatility dominates the markets.

BitBonds: Bridging Bitcoin and U.S. Debt

VanEck's newly proposed BitBonds present an innovative financial solution that blends 90% U.S. Treasury bonds with 10% Bitcoin exposure, offering a novel approach to refinancing America’s $14 trillion public debt. Investors receive full Bitcoin returns up to an annual yield of 4.5%, with any excess gains split evenly between the investor and the government. This hybrid model not only introduces inflation protection and upside potential into traditional debt instruments, but also positions digital assets as a strategic component of sovereign finance. It's a bold, forward-looking move that could reshape how investors—and governments—approach debt and diversification.

Wall Street Firms Issue Debt Ahead of Potential Spread Widening

In April 2025, major U.S. banks including Goldman Sachs, Wells Fargo, JPMorgan Chase, and Morgan Stanley launched a coordinated borrowing spree, collectively raising tens of billions through investment-grade bond issuance. This surge reflects a strategic move to lock in relatively low borrowing costs ahead of potential market disruptions. For instance, Wells Fargo issued 11-year notes yielding up to 1.5 percentage points above comparable Treasuries, a spread that investors found attractive in the current rate environment. While bond markets have recently stabilized, uncertainty surrounding U.S. economic policy—particularly new tariff proposals—has led banks to act swiftly, taking advantage of current conditions before market volatility or risk premiums rise.

This preemptive borrowing aligns with patterns seen during periods of trade uncertainty. According to a 2023 Federal Reserve Bank of New York report, increases in trade-related uncertainty, such as tariff threats or geopolitical tensions, lead banks to raise loan spreads and reduce credit availability—even to borrowers not directly affected by trade. Anticipating that new tariffs may pressure inflation and trigger tighter monetary policy or wider credit spreads, banks appear to be front-loading their debt issuance to secure favorable rates while they last. This strategic behavior underscores how closely financial institutions monitor macroeconomic signals—not just to adjust lending, but also to manage their own cost of capital.

What To Look Out For This Week!

Monday: Spring meetings of the International Monetary Fund and World Bank commence

Tuesday: Earnings: Tesla 

Wednesday: Earnings: Philip Morris International, IBM, AT&T, Chipotle Mexican Grill, Boeing

Thursday: Earnings: Alphabet, Procter & Gamble, T-Mobile, PepsiCo, American Airlines, Intel

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: William Le

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