Market and Economy

• Over 70% of Americans expect worse business conditions in 12 months—the highest level since 2008.
• April saw extreme financial volatility with gold hitting record highs and the VIX spiking, though equity and bond markets partially rebounded after the Trump administration softened tariff rhetoric and affirmed Fed independence.
• A surge in Q1 imports (+41.3%) was driven by firms and consumers front-loading purchases, particularly autos, before tariffs, which will fully take effect July 8
• Real GDP contracted 0.3% in Q1 2025, with government spending falling and consumer spending slowing to +2.3%, signaling softening demand despite continued strong consumption in tariff-sensitive categories.

• Trump’s shifting tariff policies are creating market uncertainty, with inflation indicators rising and consumer confidence hitting a 12-year low
• The federal deficit has reached nearly $1.3 trillion for the first five fiscal months—approximately $500 billion more than last year
• OECD has downgraded global GDP growth projections to 3.1% in 2025 and 3.0% in 2026
• Germany has modified its debt brake to exempt defense spending and add €500 billion for infrastructure, aiming to increase defense spending to 3.5% of GDP by 2030
• China’s manufacturing PMI increased to 50.5 in March, with industrial output up 6.9% in early 2025 despite tariff concerns

• European equities outperformed the U.S., driven by defense stocks and a moderate recovery in industrial activity.
• The U.S. housing market hit a historic low, with the Pending Home Sales Index showing the weakest January in 25 years due to high mortgage rates (7.04%).
• The top 10% of earners now account for over 50% of total U.S. consumer spending, compared to 36% in the 1990s.
• The consumer savings rate reached a 6 month high, with lower-income groups rebuilding savings, leading to a downturn in consumer spending.
• Fund managers are increasingly worried about stagflation, and economic surprises have turned negative again in 2025.
• U.S. physical gold supply is tightening, causing leasing rates to spike and price spreads between London and U.S. gold markets to reach a five-year high.

• US stocks had a volatile start to the year, with the Fed keeping rates steady, new trade uncertainty, and disruptions in the tech industry.
• Trump announced new potential tariffs on Mexico, China and Canada, sending gold to new all time highs and routing crypto.
• China’s DeepSeek R1 AI model, reportedly trained for just $6 million, triggered a 3.5% drop in the NASDAQ and a 12.8% decline in NVIDIA (NVDA), while US regulators launched a probe into potential violations of semiconductor export controls.
• US economic data showed manufacturing optimism but slowing services due to continued inflationary pressures.
• The Baltic Dry Index (BDI) dropped 25% to a 23-month low, reflecting weaker industrial demand globally and shipping overcapacity.

• The U.S. faces a massive $2 trillion federal budget deficit, with limited room for cuts in key areas such as Social Security, Medicare, defense spending, and interest expenses.
• DOGE (Department of Government Efficiency) unlikely to make real progress.
• Despite the Federal Reserve’s rate cuts, long-term Treasury rates and mortgage rates have risen significantly, almost inversely.
• Long-term bonds are now riskier due to rising inflation and interest rates, leading to both declining bond prices and eroding purchasing power.
• Higher interest rates increase the discount rate for future earnings, potentially lowering stock valuations.
• If inflation persists and interest rates rise further, the Federal Reserve may reintroduce quantitative easing, which could accelerate inflation.
• Reduced global confidence in U.S. treasuries is leading some countries to pivot toward alternatives like gold and Bitcoin.

• In 2024, the S&P500 surged by 23%, continuing its strong performance from 2023 and achieving the best back-to-back gains since the late 1990s.
• US equities now account for 67% of global equity markets.
• Despite the US 30-year fixed mortgage rate climbing to 7.0%, the housing market remained strong with median home prices increasing by 48.2% compared to pre-pandemic levels.
• The Treasury faces significant challenges in rolling over $3 trillion in short-term debt, which could lead to higher long-term yields and potential market instability.
•The Federal Reserve revised its inflation projections upward for the next few years, indicating a higher terminal rate and limiting the number of rate cuts in 2025.
• Congress temporarily extended funding through March 2025, but the looming debt ceiling poses a risk of default.

• November was a strong month for markets, with the S&P 500 achieving its best year-to-date performance since 2013, driven by optimism post-election.
• The U.S. ended its fiscal year with a $1.83 trillion deficit, the third-largest on record, with spending far outpacing receipts.
•Proposed deficit reduction plans aim to cut spending, but significant hurdles remain in addressing entitlements and achieving sustainable debt levels.
• Credit card balances are climbing, especially among prime borrowers, while delinquency rates are higher than pre-pandemic but still below 2008 peaks.
• Black Friday spending rose 3.4% YoY, with online sales surging 14.6%, partly driven by increased use of Buy-Now-Pay-Later (BNPL) agreements.

• The DOGE (Department of Governmental Efficiency) Committee faces significant challenges in addressing the $2 trillion deficit, with most expenditures politically untouchable.
• Inflation is expected to rise by 2025, driven by persistent deficit spending and nominal GDP growth.
• Gold remains a strong long-term hedge despite recent sell-offs, with equities favored over bonds during inflation.
• Natural gas may see growth due to rising electricity demand, while crude oil demand remains stagnant.
• Healthcare reform faces resistance due to lobbying, despite inefficiencies driving up costs significantly.
• Subsidies for green energy and electric vehicles may decrease as deficit concerns take priority.

• GDP grew by 2.8%, with inflation cooling to 2.4%, though food and shelter costs remain high.
• Job openings dropped to a three-year low, and layoffs reached their highest since 2020.
• 33% of auto loans are underwater, with record-high negative equity and increasing defaults.
• Rising deficit and long-term inflation fears push Treasury yields higher, impacting future rate cuts.
• The Top 10 US Companies now make up 18% of global stock market capitalization. The S&P500 is now a record high 46% of Global GDP.

• Equity markets have strong year-to-date returns, with the S&P500 having its first positive September in 5 years.
• Gold and silver surge amid continued economic uncertainty and global conflict fears.
• The Fed’s 50bps rate cut spurred a market rally, but economists are split on whether it signals an over-correction.
• China’s economy struggles with deflation, prompting the PBOC to introduce aggressive stimulus measures aimed at boosting GDP to 5% by 2024.
• The U.S. faces growing debt concerns with interest payments projected to exceed $1 trillion by 2025.
• Major dockworkers’ strike threatens to disrupt supply chains further.

• Stocks rebounded from a 10% correction in August, but the market may be overestimating the likelihood of aggressive Fed rate cuts.
• The number of banks on the FDIC’s ‘problematic list’ is increasing, with several facing unrealized losses in excess of 100% of tier-1 equity.
• The US economy shows signs of recession, with unemployment triggering the Sahm Rule, and consumer spending outpacing personal income, despite steady GDP growth.
• Gold demand is rising as central banks increase purchases, driven by concerns about inflation.
• Market concentration remains high, with growth sectors dominating global market capitalization, even as valuation metrics suggest overvaluation similar to the 2000 dot-com bubble.