6/2/2025

Good Morning. 

Jamie Dimon stated that he believes that if the U.S. debt continues to grow at an accelerated pace the bond market will panic, stating “I just don’t know if it’s going to be a crisis in six months or six years, and I’m hoping that we change both the trajectory of the debt and the ability of market makers to make markets.”

Big Tech has driven nearly half of the S&P 500’s gains since April, after leading market losses when the index bottomed out on April 8th. The Magnificent Seven now make up roughly one-third of the index. The S&P 500 is currently within 4% of its all-time high from February, as strong earnings outlooks and sentiment have improved.

Increase since April 8th:Tesla 56%, Nvidia 40%, Microsoft 30% (Data from Bloomberg)

Nvidia beat earnings expectations with $44.1B in Q1 revenue, up 69% YoY, driven by continued demand for its semiconductors. An $8B hit from China chip export bans was announced, as the company can no longer operate in China

In today’s newsletter, we will cover: 

• Markets

  • Momentum Shift

  • May’s Rebound

  • Tariff Tensions

  • Yields Retreat

  • Inflation Eases

  • Earnings Scorecard

  • Jobs Ahead

• Tariff Update

• Apollo blurs the line between private and publicly traded credit

• FED Chair Meeting President & PCE Update 

• Trump Administration Lifts Curbs on Crypto in 401(k) Plans

• What to look out for this week!

Markets 

For a full breakdown of each metric and why it matters, CLICK HERE.

• Momentum Shift: U.S. equities rebounded this week, with each of the major indexes—the S&P 500, NASDAQ, and Dow—posting gains of around 2%. While the rally helped recover some of the losses from the previous week, it wasn’t enough to fully erase the broader pullback seen from late February through early April. As a result, all three indexes remain roughly flat year-to-date.

• May’s Rebound: Following a volatile and mostly negative April, U.S. equities surged in May. The NASDAQ led the charge with a 9.6% monthly gain, while the S&P 500 rose 6.2% and the Dow added 3.9%. Information technology stocks were the standout performers, with the S&P 500 tech sector climbing over 10%.

Tech Sector Performance Splits Across Timeframes

Over the past week, solar stocks led with a 2.97% gain, while computer hardware was the biggest laggard, down 3.77%. Electronic components and software infrastructure posted solid gains, whereas semiconductor equipment and IT services declined.

On a 1-month basis, solar (+20.63%) and semiconductors (+19.97%) have shown strong momentum. In contrast, consumer electronics was the only segment to post a loss, down 5.13%. The data reflects clear leadership in energy and semiconductor sectors, while consumer tech remains weak.

• Tariff tensions: Tariff-related news appeared to drive financial markets in an otherwise calm trading week. Stocks posted their biggest gain of a holiday-shortened week on Tuesday following an update on U.S.-European Union trade talks. Later in the week, investors assessed developments in a legal challenge to the Trump administration’s authority to impose reciprocal tariffs.

• Yields Retreat: The 30-year U.S. Treasury yield dipped back below the 5.00% mark, ending the week at 4.91% after reaching a recent high of 5.09% on May 21. The pullback followed heightened concerns about the long-term U.S. debt outlook. Shorter-term yields also eased, with the 10-year finishing at 4.39%.

Global Yield Curves Diverge

The chart displays the yield curves of government bonds from major global economies, highlighting differences in interest rates across maturities. The United Kingdom (orange) currently offers the highest yields across the curve, with its 30-year bonds nearing 5.4%, followed closely by the U.S. (blue) at just under 5.0%.

European countries like France (yellow) and Germany (light blue) show moderately upward-sloping curves, reflecting lower inflation expectations and more dovish monetary policy outlooks. Meanwhile, Japan (green) and Mainland China (teal) continue to exhibit the lowest yields, with Japan's 30-year rate below 2%, underscoring persistently low inflation and slow growth.

These variations reflect diverging monetary policy stances, inflation trajectories, and investor risk sentiment across regions. The steeper curves in the U.K. and U.S. suggest higher long-term inflation expectations and/or term premiums, while the flatter curves in Asia imply more anchored rate expectations.

• Inflation eases: One measure of inflation remained above the U.S. Federal Reserve’s 2.0% long-term target in April but fell slightly from the previous month, despite concerns about the potentially inflationary impact of higher tariffs. Friday’s reading from the Personal Consumption Expenditures Index showed that core inflation excluding food and energy prices rose at an annual rate of 2.5%, down from 2.7% the previous month. 

• Earnings Scorecard: S&P 500 companies reported an average earnings increase of 12.9% year-over-year for Q1, marking the second straight quarter of double-digit growth, according to FactSet. While solid, the pace slowed from the prior quarter’s 17.8% gain. Healthcare led all 11 sectors with a standout 43.0% earnings jump.

• Jobs Ahead: Friday’s upcoming jobs report will reveal whether the recent trend of moderate yet stronger-than-expected employment growth continued in May. In April, the economy added 177,000 jobs—beating forecasts of 130,000—while March’s total was revised to 185,000, also above expectations.

Tesla (TSLA) Stock Analysis  

• Despite mounting pressure in the global EV market, Tesla has rebounded off its March lows, driven by renewed optimism around its long-term innovation pipeline and strong financial footing. According to CFRA, Tesla’s revenue is expected to decline by 5% in 2025, primarily due to a projected 10% drop in vehicle sales. However, a sharp 26% rebound is anticipated in 2026, led by improved volumes and energy storage growth.

• Earnings-wise, adjusted EPS is forecasted to fall to $2.00 in 2025, down from $2.42 in 2024 and $3.12 in 2023, before rising to $2.90 in 2026. Margins remain under pressure, with Q1 2025 EPS down 40% year-over-year amid softer volumes and pricing. Still, Tesla maintains a robust balance sheet with $37 billion in cash and only $7.2 billion in debt, positioning it well for continued R&D and product development.

• Looking ahead, investor attention is increasingly focused on the potential of new products—including the Cybercab, Robotaxi, and Optimus humanoid robot—which could drive long-term growth beyond the core auto segment. While CFRA maintains a Hold rating with a 12-month price target of $320, the outlook reflects a delicate balance between near-term EV headwinds and long-term innovation.

Tariff Update 

Rapid changes in trade policy from the White House have sent ripples through commerce, global markets, and supply chains. These shifts are largely driven by a continually evolving tariff strategy by the Trump administration. With significant developments emerging rapidly, this section aims to highlight key updates and assess their broader economic implications.

• The tariffs imposed by President Trump are being challenged by the U.S. Court of International Trade. In a recent filing, the court cited the “major questions doctrine," arguing that Trump does not have the authority to levy these import taxes. This case is very likely to reach the Supreme Court, where the legality of the tariffs will be challenged.

• As trade talks with China continue under a temporary truce, President Trump has accused China of violating the agreement. President Trump “is going to have a wonderful conversation about the trade negotiations this week with President Xi,” (White House National Economic Council Director Kevin Hassett)

• Proposed tariffs on steel and aluminum would double the current import tax from 25% to 50%.

• TACO Trade is a theory growing in momentum, which stands for Trump Always Chickens Out.  The idea is that investors seize the opportunity on market sell-offs after announced tariffs, betting the administration will back down and equities will rebound following the news.

Apollo blurs the line between private and publicly traded credit

Apollo Global Management is continuing to look for ways to expand its ability to originate loans as a behemoth in private credit. The firm is on a mission to penetrate and grow what it believes is a “$40 trillion market” for private credit. This is one of the largest estimates by an industry leader. The current size of the asset class is $1.7 trillion, a figure rapidly growing.

• Private credit refers to loans made directly to companies by firms like Apollo, meaning they are not publicly traded. These loans typically remain on the lender’s balance sheet and are illiquid, making it difficult to accurately assess their true value. This illiquidity means the loans don't fluctuate in value. This protection from volatility is one of the sought-after benefits.

• Keeping these loans on the balance sheet is potentially costly, hampering growth, and creating an opportunity cost. In addition, investors are demanding to redeem returns earlier. This illiquid strategy is increasingly becoming a thorn in Apollo’s ambitious plans. 

• Creating liquidity would allow Apollo to offload loans and free up capacity for new origination, while also giving investors more flexibility to redeem their investments.

• To create liquidity, Apollo is partnering with multiple banks, including JP Morgan and Goldman Sachs, to syndicate investment-grade debt originated by Apollo. Syndication would introduce these private loans to secondary markets where they could potentially trade

• This partnership is part of a larger strategy at Apollo to build a first-of-its-kind marketplace for private credit. Private credit could trade similarly to traditional credit with real-time information, including prices. 

The introduction of liquidity raises concerns for some investors who value private credit as a hedge against volatility. Others, however, view it as the natural next step in the evolution of a vital part of the debt capital markets. Regardless, private credit’s deepening connection with banks is reshaping how the asset class functions.

• “We will not know — in the investment grade landscape — the difference between public and private 18 months from now. It’s going to be the same types of companies, the same rating, the same size.” (Marc Rowan, ceo of Apollo) 

Note to the reader: Liquidity in private investments is becoming the next frontier in private markets. Secondary offerings in private equity are giving investors greater flexibility, ETFs are starting to include private assets, and private credit, which has long been known for its illiquidity, is now positioning to become actively traded. 

FED Chair Meeting President & PCE Update (April 2025)

 On May 29, 2025, President Trump summoned Fed Chair Jerome Powell to the White House and told him it was a mistake not to lower interest rates, citing economic disadvantages against China. Powell responded that the Fed’s policy decisions are based solely on incoming economic data and non-political analysis. This was their first in-person meeting since 2019, reflecting ongoing tensions over rate policy. The Fed has kept rates steady at 4.25%-4.50% amid inflation concerns linked to tariffs. While Trump has criticized Powell, he has not attempted to remove him, and recent court rulings have reinforced the Fed’s independence.

(Fox Business)

 On Friday, May 30th, 2025, the latest Personal Consumption Expenditures (PCE) report shows that inflation is continuing to decline, consistent with the broader downtrend reflected in recent CPI data. In April, the headline PCE price index increased 2.1% year-over-year, below the expected 2.2% and down from 2.3% in March. Core PCE, which excludes food and energy, rose 2.5% annually, in line with forecasts and lower than the previous 2.6%—its lowest level since March 2021. On a monthly basis, both headline and core PCE rose by 0.1%.

(U.S. Bureau of Economic Analysis)

 Over the last three months. CPI and PCE inflation continue to fall, with PCE, Fed’s preferred inflation gauge nearing the Fed’s 2.0% inflation target. This trend has strengthened expectations for a rate cut in either July or September 2025. However, businesses are running through Q1 inventories that had temporarily lowered prices. New shipments, priced higher, may lead to short-term increases in CPI and PCE if costs are passed to consumers. Households have either saved or made early purchases, behavior not yet reflected in inflation data. While any spike in inflation may prove temporary, it could delay immediate rate cuts despite the longer-term trend pointing to lower interest rates.

(CME FedWatch)

Trump Administration Lifts Curbs on Crypto in 401(k) Plans

(U.S. Department of Labor)

On May 28, 2025, the U.S. Department of Labor rescinded its 2022 guidance that discouraged including cryptocurrencies in 401(k) plans, marking a shift toward a neutral stance on fiduciary investment decisions. Labor Secretary Lori Chavez-DeRemer criticized the previous policy as overreach, emphasizing that fiduciaries, not federal regulators, should determine investment options. This policy change aligns with the Trump administration's broader support for the cryptocurrency industry. Despite the regulatory shift, experts caution that cryptocurrencies remain high-risk investments, particularly for those nearing retirement. While the move may encourage some plan sponsors to consider digital assets, widespread adoption in retirement portfolios is expected to proceed cautiously due to inherent volatility and fiduciary responsibilities.

What to Look Out For This Week 

Monday, June 2

• Federal Reserve Chair Powell is scheduled to speak

Tuesday, June 3

• Earnings: CrowdStrike Holdings, Ferguson Enterprises, Hewlett Packard Enterprise, Dollar General

Thursday, June 5

Economic Data:

• Initial jobless claims 

• U.S. trade deficit April

• U.S. productivity  (Q1)

Friday, June 6
Economic Data:

• U.S. employment report (May)

• Consumer credit (April)

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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