Weekly Market Update (May 25, 2025)

Market Hedwig
9 hours ago
2 min read

HIGHLIGHTS

30Y treasury yields remain above 5%, mainly driven by increasing concerns over the US debt burden. The US house bill further worsens the dynamics of US debt and increases long-term yields in Japan.

EU: The US’s threat of 50% tariffs on the EU increased the stagflation risks. If it proceeds and the EU does not respond with retaliation instantly, it will warrant a more accommodative monetary policy stance.

Oil: Oil prices dropped about $20 since January, driven by the increase in OPEC supply and expectation of low demand amid weak economic outlook. Although lower oil prices can ease inflation, the impact of tariffs would still be significant.

Fed: Although the Supreme Court allowed the removal of two Federal Government officials this week, it explicitly emphasized that the decision would not have implications for removal protections of Federal Reserve Officials. The risks of statutory changes to monetary policy independence in the US have decreased.

MARKETS

Nasdaq	18,737.21	-2.47%
S&P 500	5,802.82	-2.61%
Dow	41,603.07	-2.47%
10-Year	4.51%	+7bps
Brent	64.39	-1.53%
DXY	99.10	-1.86%

*Data as of market close. 5-day change ending on Friday.

VIEW FROM THE STREET

Equity

Morgan Stanley: The extremely high stock valuations remain vulnerable, especially compared to the cost of capital. The move in real estate indicated the investors' concerns about the global risk premiums and the way to hedge.

Standard Chartered: The short-term technical models turned bullish for US and China equities. Given the strong Q1 earnings, we have a slight preference for US stocks, and the selling pressure of US stocks was arguably excessive.

Fixed Income

Goldman Sachs: The Moody downgrade of US treasury bonds has no impact on the ability of institutional investors to hold. We believe high-quality corporate bonds will not enjoy lower funding costs than the US government.

Morgan Stanley: A well-funded budget and tax bill in the US is likely to push rates down and investment returns up. However, we suggest collecting coupons, especially in corporate bonds, while waiting for more clarity.

Economy

Goldman Sachs: The challenging fiscal outlook and potential stagflationary shock from tariffs will continue to put a floor on term premium. However, slowdown in growth will push the yields lower, and potentially a more volatile path.

UBS: Strong selling pressure on US treasury this week, as investors are worried about the swelling debt burden. However, we believe the US's ability to repay debt is not in question.

KNOWLEDGE TRANSFER

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DISCLOSURE

This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.