Weekly newsletter 124
All market and portfolio news for the week
Welcome to all new subscribers! Subscribers to Outperforming the Market get full access to the Barbell Portfolio, all my intrinsic value, 1-year and 3-year price targets in the Price Target Report, and real-time trade alerts when I place buy and sell orders. (I am fully invested in the Barbell Portfolio)
In addition, subscribers get a weekly deep dive on Fridays, a weekly newsletter on Mondays, and other earnings analysis, market review and portfolio review articles during the week. All links can be found consolidated here.
Articles posted in the last week
Market Updates
Fed
Majority of Fed officials leaning against July rate cut as officials, including Fed Chair Jerome Powell, have indicated that they need more time to determine if tariff-driven price hikes will lead to persistent inflation. Several officials, including Mary Daly and Susan Collins, have suggested that a rate cut may be possible in the fall, but not at the Fed's July 29-30 meeting. Other officials, including Tom Barkin and Austan Goolsbee, have expressed caution about adjusting rates too quickly, citing uncertainty over the economic outlook and the need for more data.
Fed Powell, speaking before the U.S. House of Representatives Financial Services Committee, reiterated his view that rate cuts can wait until the economic effects of tariff increases are better known, adding "we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance." He indicated that June and July inflation figures will be particularly important; and that the Fed is “perfectly open” to the idea that the pass-through will be “less than we think, and if so, that will matter for our policy.” The dollar’s prime role in the global financial system remains intact, Powell said in response to repeated questions on this point. But he reiterated that the US is on an unsustainable path for borrowing and said there’s no way to know where the tipping point is for the debt burden. Stocks stayed higher through the three-hour hearing, while interest-rate futures continued to reflect expectations for the Fed to resume rate cuts in September.
US consumer confidence
US consumer confidence unexpectedly deteriorated in June across all age cohorts and across the political spectrum as households increasingly worried about job availability against rising economic uncertainty, with the largest decline among Republicans. The index fell -5.4 points to 93 (cons. 100) this month, erasing nearly half of the sharp gain in May. The share of consumers viewing jobs as plentiful was the smallest since March 2021 and were mostly undecided on big-ticket purchases. There was a decline in those expecting incomes to increase, though perceptions of the current financial situation remained solid.
Finalized US and China trade understanding
The US and China have finalized a trade understanding reached last month in Geneva, which codifies terms including China's commitment to deliver rare earths. The White House plans to reach agreements with 10 major trading partners, with President Trump prepared to finalize deals in the coming two weeks. The China agreement sets out terms from trade talks this year, but still hinges on future actions, including China's export of rare earth materials, before the US lifts its countermeasures.
US GDP revised lower
US GDP revised lower as consumers slash services spending. Spending on services contributed 0.3 percentage point to gross domestic product in the first three months of the year, down sharply from a previously reported 0.79-point boost. Overall consumer spending increased at a 0.5% pace, instead of the previously reported 1.2%. GDP declined at a downwardly revised 0.5% annualized rate in the first quarter as a result. Economists flag services and travel as being most at-risk to shocks in consumer sentiment.
US jobless claims
Recurring US jobless claims jump to highest since November 2021, signaling more people are staying out of work for longer. The elevated level of continuing claims aligns with other surveys and data pointing to a slowdown in the labor market, suggesting employers are hitting the brakes on hiring, but holding onto their existing workers. Federal Reserve officials are warning that higher tariffs may lead to layoffs, with Richmond Fed President Tom Barkin predicting that businesses may face pressure to raise prices and reduce costs, potentially triggering layoffs, by this summer.
US business activity
US business activity slowed marginally in June, though prices increased further amid aggressive tariffs on imported goods, suggesting that an acceleration in inflation was likely in 2H25. Flash US. Composite PMI Output Index slipped to 52.8 this month from 53.0 in May. Flash manufacturing PMI was unchanged at 52.0 (cons. 51.0), while services PMI dipped to 53.1 from 53.7 in May (cons. 53.0). S&P Global noted a slight rise in optimism among manufacturers "in part reflecting hopes of greater benefits from trade protectionism, however adding that "companies generally remained less upbeat than prior to the inauguration of President Trump."
NATO increases defence spending
NATO leaders on Wednesday backed the big increase in defence spending that U.S. President Donald Trump had demanded, and restated their commitment to defend each other from attack after a brief summit in the Netherlands. While Trump got what he wanted at the annual meeting, tailor-made for him, his NATO allies will be relieved that he committed to the fundamental principle of collective defence. However, he threatened to punish Spain after Prime Minister Pedro Sanchez declared it could meet its commitments to NATO while spending much less than the new target of 5% of GDP.
Trump vs Jerome Powell
Trump called Federal Reserve Chair Jerome Powell "terrible" in his latest attack on the central bank chief and said he has three or four people in mind as contenders for the top Fed job. The leading contenders reportedly include former Fed Governor Kevin Warsh, National Economic Council head Kevin Hassett, current Fed Governor Christopher Waller, and Treasury Secretary Scott Bessent. Analysts see this as an effort to influence monetary policy through a "shadow" Fed chair even before Powell leaves office in May 2026.
Trump and Iran
President Donald Trump said the US would hold a meeting with Iran next week, believing the Israel-Iran conflict was effectively “over” after the US bombing mission, and casting doubt on the need for a diplomatic agreement. Trump claimed that US bombing had "obliterated" Iran's key nuclear sites, including Natanz, Isfahan, and Fordow facilities, and the country's nuclear materials were buried under "granite, concrete and steel". The US and Iran are set to resume talks, as Trump disputed a US intelligence report that the attacks had limited impact on Iran’s nuclear program, citing Iran's foreign ministry assessment that its nuclear installations were "badly damaged" by US airstrikes. IAEA also said "very significant damage is expected to have occurred" at Fordow.
New-car registrations in Europe
New-car registrations in Europe rose 1.9% in May to 1.11 million units, driven by strong demand for electric and hybrid vehicles. Hybrids and battery-electric cars saw significant sales growth, with plug-in hybrid models surging 46% and battery-electric cars jumping 27% to take a 17% market share. Chinese manufacturers, led by BYD Co., continued to gain ground in Europe, more than doubling their market share to 5.9% and outselling Tesla in some markets. The improvement comes at a delicate time for the industry as Europe’s carmakers juggle weak demand at home with increased competition.
Uber
Uber is beginning autonomous ride-hailing cross 65 square miles of Atlanta with Waymo, after offering the service in Austin since March. The race to deploy robotaxis is picking up pace as Waymo expands testing and Tesla began limited trials. There are now 100 Waymo vehicles on the Uber platform in Austin and it will launch with dozens in Atlanta. Riders will pay the same rates as UberX, Uber Comfort, or Uber Comfort Electric when driven in a Waymo self-driving vehicle but they will not be prompted to tip.
Popmart
Labubu’s mega markups make Pop Mart a $43 billion export giant, posting a gross profit margin of nearly 67% last year. The phenomenon marks a rare mainstream breakthrough for Chinese pop culture in Western markets, with Pop Mart's sales projected to rise to $6 billion in 2027, a more than 500% increase from 2023. The company's rapid success in the West is attributed to its direct-to-consumer strategy, low manufacturing costs, and high profit margins, with overseas sales expected to exceed domestic sales in 2025.
Xiaomi
Xiaomi is launching a 253,500 yuan sport utility vehicle, the YU7, to compete with Tesla's popular Model Y. The top model goes for 329,900 yuan and can travel 760 kilometers (470 miles) on a single charge, and accelerates to 100 kilometres per hour in 3.23 seconds. They come in 9 colors, all equipped with lidar, which strengthens driver assistance technology, and an 800-volt platform for fast charging. The company began taking pre-orders with a 5,000 yuan deposit and processed over 200,000 pre-orders within three minutes. Xiaomi founder Lei Jun is confident that the YU7 will help the company's EV unit achieve profitability in the second half of the year.
Nike
Nike shares surge 10% after-market despite worst results in years, on growing investor confidence that its turnaround plan finally seemed to be paying off. Chief executive Elliott Hill, who returned from retirement last year to take the top job, outlined initiatives including reorganising to focus on developing product lines for crucial sports. The company is reallocating supply from China to other countries in response to Trump’s tariffs, with plans to reduce China's share of Nike footwear imports to a high-single-digit percentage by the end of its fiscal year.
Constellation Energy
Constellation Energy fast-tracks Three Mile Island restart for Microsoft data centres, which may occur in 2027, about a year ahead of schedule. Management had expected the process to be slowed by wait times associated with connecting power projects to the regional grid, but operator PJM Interconnection has expedited grid connection for select projects. Nuclear power interest has resurged amid U.S. electricity demand growth. Despite the enthusiasm, nuclear power plant projects have historically been far over budget and behind schedule.
CATL
CATL is making overseas expansion its top priority due to intense competition in China's domestic car market. CATL is transforming its factories to be "greener", "smarter", and "reconfigurable" to adapt to new products and reduce energy consumption and emissions. The company is exploring diverse business models for regionalized production, including a factory in Germany and an under-construction plant in Hungary, to support its global ambitions.
Micron
Micron forecast Q4 revenue above estimates on Wednesday (June 25) on robust demand for its high-bandwidth memory (HBM) chips used in AI data centres. The memory chip maker reported a nearly 50% jump in Q3 sales of its HBM chips from the previous quarter, reporting revenue of $9.30 billion (est. $8.87 billion). Management projected Q4 revenue of $10.7 billion (cons. $9.88 billion). Micron also expects its market share in HBM chips to grow to match its overall share for dynamic random-access memory (DRAM) chips sometime in the second half of calendar 2025.