5/12/2025

Good Morning.

Trade talks are in the works…the UK has agreed to a preliminary trade agreement, however, it still leaves the 10% flat tariff in place. According to Scott Bessent, China and the U.S. have made “substantial progress” as the largest economies work to restore trade. 

Warren Buffett announced he would step down as CEO of Berkshire Hathaway, and Greg Abel would be his successor. Berkshire Hathaway is worth $1.6 billion and has consistently outperformed the S&P 500 through its value-oriented and strategic timing.

The Fed, as expected, kept rates at the same level. The FOMC is in an incredibly difficult position as tariffs risk increased inflation, and economic growth continues to slow down. The Fed remains in a wait-and-see mode until substantial data makes the case for a cut.

In today’s newsletter, we will cover: 

• Markets

  • Reader update

    • Indices

    • Volatility Across Markets 

    • Key Asset Pricing  

  •  Sideways Market

  • Trade Movements

  • Oil Volatility

  • Gold Rally Resumes

  • Bitcoin Reclaims $100K

• HSBC Tariff loans

• Private Credit at the Milken Conference

• Digital Assets Update

• What to look out for this week!

Markets 

Reader update: To give more color to global market conditions, we have expanded our Markets section to include additional market data. Here's what each asset class represents and why it's relevant to market participants.

Indices:

• S&P 500: Represents the 500 largest publicly traded U.S. companies; a core benchmark for U.S. equities and institutional portfolios.

• Dow Jones Industrial Average: Tracks 30 large U.S. companies; reflects broader economic trends and investor sentiment.

• Nasdaq Composite: Tech-heavy index that highlights growth stocks and innovation-led sectors.

• Russell 2000: Measures performance of small-cap U.S. stocks; sensitive to changes in domestic growth and credit conditions.

• MSCI World Ex US: Captures developed international equity markets outside the U.S. 

Volatility Across Markets  

• VIX: Implied volatility of the S&P 500; the market’s “fear gauge” 

• GVZ: Reflects volatility in gold options; spikes often indicate rising inflation fears or geopolitical stress.

• MOVE (Merrill Lynch Option Volatility Estimate): Tracks implied volatility in U.S. Treasury bonds; a key indicator of interest rate uncertainty.

• ARKK (ARK Innovation ETF): A proxy for speculative growth investing; useful for sensing risk-on vs. risk-off behavior in equity markets.

Key Asset Pricing  

• US10Y: A benchmark for long-term interest rates; affects everything from mortgage rates to stock valuations.

• U.S. Dollar Index (DXY): Measures the strength of the U.S. dollar against major currencies; impacts global trade, commodity prices, and capital flows.

• Crude (^CL): A major input for inflation and economic activity; oil prices often drive energy policy and consumer costs.

• Gold (^GC): A traditional store of value; tracks market sentiment around inflation, currency debasement, and systemic risk.

• BTC: A traditional store of value; tracks market sentiment around inflation, currency debasement, and systemic risk. 

Sideways Market: Stocks traded within a narrow range for most of the week, with major U.S. indexes ending slightly lower overall. The pause comes after a period of heightened volatility. Despite recent gains, the S&P 500 remains nearly 8% below its record high from mid-February.

Trade Movements: U.S. stocks declined to start the week but rebounded midweek as optimism around trade talks lifted sentiment. The U.S. and U.K. unveiled a framework for a future trade agreement, while U.S. and Chinese officials signaled plans to restart negotiations following recent tariff escalations.

Oil Volatility: U.S. crude briefly dipped below $56 per barrel on Monday—its lowest level in over four years—before rebounding to around $61 by Friday. Despite the late-week rally, prices remain far below the $80 level seen just four months ago, as shifting trade dynamics and global growth concerns continue to drive volatility.

Gold Rally Resumes: Gold resumed its sharp year-to-date climb after a two-week pullback, surging early in the week and briefly reaching $3,444 per ounce—near its April 21 record high. By Friday afternoon, the metal was trading around $3,350, up over 3% for the week, as investors returned to safe-haven assets amid macro uncertainty.

Bitcoin Reclaims $100K: Bitcoin surged back above the $100,000 mark on Thursday for the first time in over three months. By Friday afternoon, it was trading near $103,000—up roughly 6% for the week and well above its recent low of $77,000 from a month ago.

HSBC Tariff Loans

• HSBC has announced a new loan. The bank will provide loans to U.S companies to cover unexpected changes in costs that resulted from a fractured supply chain in the wake of tariffs. 

• The loan will cover the cost of tariffs that U.S. companies face when importing goods.

• Customers who enter into agreements with HSBC will have their trade duties automatically billed to HSBC.

• “By settling import duties directly and frictionlessly through HSBC TradePay, our US clients have more visibility and control over their working capital” (Vivek Ramachandran)

Private Credit at the Milken Conference

• The Milken Conference is an annual gathering of leaders in business, finance, and government in LA.

• The conference discussed the challenges and innovations of private credit

• In a pitch to investors and the government, Treasury Secretary Scott Bessent argued for deregulation to promote growth. Referencing private credit as evidence, he said, “The growth of private credit tells me that the regulated banking system has been too tightly constrained.”

• Opponents of private credit have argued that the unregulated asset class has not been tested by economic turmoil. There have been arguments that in an economic downturn, companies could default on payments, and private lending strategies would go bust.

• Robert O’Leary Oaktree “I think we’re going to get into more sort of anxious points in time where LPs will want to trade, and I think those discounts will go out further.” The lack of liquidity has raised concerns that investors will sell positions in private credit strategies at deep discounts if fear spreads. 

  • The risks go further than investor exposure. Banks have a growing exposure of over $500 billion, and private equity has grown reliant on this form of financing, as fears of a cascading event that could have widespread effects grow.

• Proponents argue that private credit’s separation from the markets in tandem with disciplined and thorough credit analysis makes the asset class a haven in turmoil.

• CEO of Ares, Mike Aroughet, “I can’t help but think that there might actually be around the corner, in the wake of some of this turmoil, a golden opportunity that’s forming to deploy larger and larger dollars given how much valuations have corrected,”.

• TCW Group CEO Katie Koch “We are doing it very covenant-heavy. We’re doing it very diligent-heavy. We’re saying ‘no’ a lot,”

• Dry powder in private credit strategies has continued to grow, a sign investors want to increase their allocations, evident by Ares' $20 billion latest funding round.

• Private credit titans will face a competitive environment to find valuable opportunities without sacrificing quality and covenants.

• Sourcing will remain one of the greatest strengths in the industry, finding value during economic turmoil.

• The consensus of the conference was that there will be winners and losers determined by the quality of investments. 

Digital Assets Updates

1. Digital Assets On A Run

Since April 20, 2025, Bitcoin has led a broad rally in digital assets. It opened at $85,066.07 and reached $104,799.98 by May 11—a gain of over 23%, according to Yahoo Finance. Ethereum reclaimed the $2,500 level following its recent Pectra update, boosting confidence in major Layer 1 tokens. Crypto Bubbles data shows many altcoins have posted double-digit gains over the same period. The trend reflects reduced market uncertainty, renewed institutional inflows, and growing expectations of monetary easing later this year

2. Ethereum Latest Technology Update

The Ethereum Pectra update, launched on May 7, 2025, introduced major changes aimed at improving speed, user experience, and staking efficiency. It is expected to make Ethereum more competitive with faster, low-fee blockchains by streamlining how users and validators interact with the network. These improvements have boosted investor confidence and helped push Ethereum back above the $2,500 mark. As a result, Ethereum regained momentum in the market and reasserted itself as a leading Layer 1 platform.

3. Coinbase to acquire Deribit

(Coinbase Website)

Coinbase has announced a $2.9 billion acquisition of Deribit, the world’s largest crypto options exchange. The deal includes $700 million in cash and 11 million shares of Coinbase Class A stock. Deribit, based in Dubai, controls about 85% of global crypto options trading and saw over $1.2 trillion in volume in 2024. This acquisition positions Coinbase as a major player in the crypto derivatives space, expanding its offerings beyond spot and futures into options. The move aligns with Coinbase’s strategy to attract more institutional clients through a full-service trading platform. Analysts see the deal as a response to growing competition and a favorable regulatory climate in the U.S. under the current administration. Coinbase’s stock rose following the announcement, reflecting investor confidence in the strategic value of the deal. The integration is expected to close by year-end, pending regulatory approval. Once finalized, Coinbase will offer spot, perpetual, and options trading under one brand. This consolidation marks one of the most significant mergers in the digital asset industry to date.

What To Look Out For This Week!

Tuesday (May 14):

• Economic Data: April Consumer Price Index (CPI) – key inflation reading with implications for Fed policy.

• Earnings: Tencent Music (TME)

Wednesday (May 15):

• Economic Data: Producer Price Index (PPI), Empire State Manufacturing Index

• Earnings: Cisco Systems (CSCO), JD.com (JD)

Thursday (May 16):

• Economic Data: Retail Sales, Initial Jobless Claims, Business Inventories, NAHB Housing Market Index

• Earnings: Walmart (WMT), Applied Materials (AMAT), Take-Two Interactive (TTWO), Alibaba (BABA)

Friday (May 17):

• Economic Data: University of Michigan Consumer Sentiment (Prelim)

• Fed Speakers: Jefferson, Waller, Daly

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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