We started the week thinking it would shake things up right away with the new downgrade of US debt.
It came at the right time because the week was looking quiet, and we needed something to keep us busy — and the disappearance of the last TRIPLE A rating definitely gave us something to chew on. Futures opened the day deep in the red, but the trick didn’t work: sellers didn’t show up. It didn’t take long for the market to shrug off Moody’s downgrade and move on. By the end of the day, the S&P 500 even closed in the green — like a giant middle finger to the doom-and-gloom narrative pushed by the rating agency…

Geopolitics dominates everything

Looking at yesterday’s performance, there really wasn’t much to get excited about. The Nasdaq gained 0.02%, the S&P 500 rose 0.09% and ended in the green for the sixth straight session. Even the Dow Jones did better with a 0.34% gain. In Europe, Germany reached new highs while France did absolutely nothing — meanwhile, Macron was busy lining up billions in investments, aiming to make France Great Again, thanks to his summit packed with overinflated egos from the business and political worlds. One thing’s for sure: those tens of billions in investments will surely erase the debt Bruno Le Maire left lying around. But that wasn’t the real story of the day. The real story was that we almost panicked — and then didn’t. We stayed in the red for half an hour and then moved back up, because hey, if the US and China just figure out a way to work together, then EVERYTHING — I mean, EVERYTHING ELSE — will instantly be forgotten…

The logic is pretty simple: Moody’s should have pulled the triple A a decade ago. Their competitors did it years back. So don’t try to sell us that this was a “surprise.” Moody’s probably did it for political reasons, or maybe they just forgot they still had the US at triple A. The result? The market doesn’t care. Because, in reality, the chance of a market explosion if there’s a US–China deal is far bigger than the chance of a real drop due to some downgrade nobody takes seriously. So yesterday, investors tossed the downgrade into the trash and focused on the “possible” upside. And if you listen to “the people who know” — and I mean the economists working in banks — none of them seemed to doubt or panic over the weekend’s announcement. Except for Ray Dalio, who showed up to paint yet another doomsday scenario for the 243rd time since retiring.

Calm but clear-cut opinions

At JP Morgan, they whipped out a calculator and some very British-style composure — which is surprising for Americans. Jamie Dimon’s team basically said, “Yeah well, we’ve seen worse, and honestly, we expected it.” Same reaction at Bank of America. Over at UBS and Morgan Stanley, they just rolled their eyes: “Did the stock market drop? No? Then it’s fine…” What really worries them isn’t Moody’s rating, it’s Trump’s tariffs. Because while everyone’s distracted by a useless credit rating, Trump keeps threatening the world with his MAGA-made taxes. And by the way, the European Commission just revised its growth forecast downward — despite Macron’s “Choose France” summit.

Oh, and we can’t skip Ray Dalio’s latest statement. You know, when the market shows resilience and refuses to drop — even when it seems like it should — Dalio always steps in to tell the market how dumb it’s being.

Yesterday, the Bridgewater guru, who’s about as cheerful as a mortician collecting cowboy bodies after a gunfight at the OK Corral, declared that Moody’s didn’t go far enough. The real issue isn’t default risk — it’s the money printer. Translation: if everything goes south and the US still wants to pay its interest, it’ll turn on the money printer. Which means more dollars flooding the market, devaluing the currency until it’s worth about the same as Monopoly money. So yes, creditors will get paid — in banana money. That’s where you understand the difference: Moody’s talks about the quality of the paper, Dalio talks about the ink.

Meanwhile, the White House insists US debt has never been so “safe” — but that smells like lazy PR spin from a comms team that didn’t have time to prep talking points.

Conclusion: Moody’s spoke. Markets listened. Then ignored it like their first stop-loss.

Other topics, other worries

If we go back through yesterday’s session, we mostly talked about the DOWNGRADE, touched on tariffs a little, and… that’s about it. Given the final market performance, nothing major happened. Still, digging through the flood of daily commentary and articles, there were two or three worth reading — just to give us something to think about beyond Trump’s social media rants. One in particular made me wonder: Should we really fear inflation?

If we start from the basic assumption that new tariffs will raise prices — since everything imported will be more expensive — then yes, inflation seems inevitable. But look at the actual numbers: CPI, PPI, and PCE all suggest things are calming down. Gasoline prices have dropped over 10% year-on-year. Sure, households are still under pressure, and surveys show they’re expecting a return to 1981-style inflation — 7.3% according to the latest University of Michigan survey.

Okay, but that survey came out before the famous “90-day pause” between Trump and China. Since then, things have “theoretically” calmed down. And don’t forget that most of the price index isn’t Barbie dolls from Shenzhen — it’s housing. And rents are flat or even declining. So the Fed might still have room to keep calm. Meanwhile, Trump’s taking shots at Walmart for saying they’ll raise prices:

“They made billions! Let them tighten their belts and stop whining!”

Basically, he wants margins to absorb the pain — not consumers. Because consumers are voters. (Sure, the Walmart CEO is also a voter — but there are fewer of him.)

Anyway, the Fed’s refusal to ease interest rates may soon hit a wall. Maybe it’s too early to say for sure — but with all the Moody’s noise dying down soon, I’m hunting for the next big topic.

In Asia, China Shows Its Claws
This morning, it’s a bit of a party in Asia. In China, markets were hoping for a silver lining. Beijing just cut its key interest rate — another attempt to revive a tired economy. We’re now at historically low levels, basically digging through the floor in hopes of striking some growth. The message is clear: the People’s Bank of China is ready to unleash more stimulus if needed. It’s an outstretched hand to the markets, an effort to calm nerves.

But investors want more. Sure, low rates are nice, but what they’re really waiting for are real fiscal measures — stimulus, concrete action, consumer plans that make people want to buy something more exciting than instant noodles with powdered seasoning. As it stands, Hong Kong is up 1.35%, Shanghai is gaining 0.38%, and Tokyo is up 0.44%, even as everyone keeps whispering “recession” in the Land of the Rising Sun.

And then — crash. Just as Chinese stocks were starting to lift their heads, Beijing dropped a statement reminding everyone that the U.S.-China trade deal hasn’t actually been signed yet. A sharp rebuke, sparked by the U.S. wanting to impose more restrictions on Huawei chips. China sees it as a provocation. Sabotage. A betrayal of the trade truce signed just last week in Geneva.

In short: the Americans are playing cowboy while China is still trying to play nice. Trump and his crew haven’t responded yet to China’s protest, but it’s likely coming. Hopefully, the reaction will be measured, because if this fragile truce blows up after just six days, we’ll be talking instability and renewed volatility. The hope for a real de-escalation of the trade war could go straight back into deep freeze.

Meanwhile, oil is trading at $62.16, gold is at $3,213, and Bitcoin — which briefly touched $107,000 yesterday — is now trading at $105,700.

What to remember this morning:

Since we’re talking about interest rates and how yields are climbing even higher after Moody’s announcements, it’s worth noting (even if no one’s talking about it) that the fixed rate for 30-year mortgages in the U.S. just hit 7.04%. That’s the highest in a very long time.

The result? With painful interest rates, real estate prices still floating in the stratosphere, and stagnant wages, the American Dream is turning into a weekly Airbnb rental. Home sales are at their lowest in 30 years, and even in spring — supposedly “the season of blossoms and real estate deals” — it’s a dead calm.

Developers are depressed, buyers have vanished, and to lure people in, a third of sellers are slashing prices or offering incentives like “free closing costs.” But let’s be clear: even with discounts all over the place, with a median home price of $438,500, you still need a very solid wallet — especially with 30-year rates at 7%. For now, the average American looks at home listings like they look at a Bugatti in a showroom: pretty, but completely out of reach.

Elsewhere in the news:

After Ray Dalio trying to sell us Monopoly money, Jamie Dimon is — yet again — sounding the alarm. According to the JP Morgan boss, the markets are acting like “everything’s fine, Madam Marquise,” even though Trump’s tariffs are still in place. Even if slightly reduced, these tariffs are “extreme,” says Dimon, and the real economic shock hasn’t hit us yet.

He compares today’s situation to 1971: back then, 10% tariffs on all trade partners led to inflation, slowdown, and stormy vibes. Today? Same deal, except everyone’s pretending not to notice while companies like Walmart, JetBlue, or GM panic and pull their earnings guidance.

Markets, meanwhile, keep bouncing. Dimon finds this completely surreal. In his view, a good -10% correction wouldn’t hurt. He adds that credit is currently a minefield: over-leveraged companies might hit a wall with no airbags.

And the cherry on top? According to Dimon, central banks are totally out of touch. They think managing the economy is just about tweaking short-term rates. “All-powerful but disconnected,” he says. You can sense the guy no longer believes in Father Powell.

And finally: nobody knows how other countries will respond to Trump’s moves. What’s clear is the world is starting to make deals behind Trump’s back. In short: markets are calm, but Dimon is wary of what might happen. Let’s just remember he’s been predicting doom for 3–4 years now, so I’m mentioning it, but that doesn’t mean you need to sell everything and jump ship before 11 a.m. It’s just Dimon talking.

Other things:

The Chinese battery giant CATL just went public in Hong Kong. The stock is up 17% from its issue price, and the nearly $5 billion raised will go toward expansion in Europe. CATL (Contemporary Amperex Technology) supplies batteries to all the big carmakers, starting with Tesla.

Speaking of Tesla, we’re expecting updates this week on sales numbers in China. And there’s reason to worry — Tesla is selling much less. April numbers are weak, and Q2 deliveries are already in danger. Sales are down 49% in Europe and 13% in the U.S..

What’s to blame? Elon Musk playing politics too much, or the underwhelming new version of the Model Y? Probably both. Musk swears he’ll spend more time at Tesla than in Washington — good news, because it’s urgent.

Anyway, the stock’s up 47% since earnings, because Wall Street loves dreaming about robotaxis and cyborgs. But now it’s time to start delivering, or it’s going to end badly. And for the past two days, reports say the Cybertruck isn’t selling anymore, with 10,000 units piling up and an $800 million loss looming. Good thing Tesla’s not just about cars.

Also, Novavax jumped 15% after getting final FDA approval for its COVID vaccine. OK. They’re allowed to sell it — but who’s still buying that? Regardless, the market was pleased.

Meanwhile, Pfizer will pay $1.25 billion to Chinese biotech 3SBio for an experimental cancer treatment, with up to $4.8 billion in milestone payments depending on results. Pfizer gains global (ex-China) rights to SSGJ-707, a drug being tested against various cancers. A phase III trial will launch in China this year, and the FDA has already greenlit trials in the U.S.

Pfizer will also invest $100 million in 3SBio shares and manufacture the drug in the U.S. 3SBio’s stock jumped 35% in Hong Kong, now valued at nearly $6 billion. Pfizer’s stock didn’t budge.

On the data front…

It’s not a big day. Bostic from the Fed will speak, and we’ll get the PPI from Germany. For now, futures are down 0.28% due to Huawei chip tensions with China. Markets remain strong, and nothing seems able to derail the machine — unless Trump picks a fight with the Chinese.

See you tomorrow, same time, same place. Until then, stay strong and no crazy moves. Have a great day!