Good morning investors,
Markets are holding their breath ahead of May’s CPI data and the first details of a US-China trade framework. With the S&P 500 flirting with record highs, Treasury auctions underway, and geopolitical tensions simmering, the next few days could dictate whether risk assets charge forward or hit a wall in Q3.
Opening Bell
Markets paused for breath this morning, with equity futures pulling back modestly as traders digested the early outlines of a US–China trade framework and braced for May’s inflation report. The S&P 500 sits just shy of its all-time high, but today's CPI data will likely determine whether that resistance becomes a launchpad or a lid.
Geopolitical détente and monetary ambiguity remain the defining features of the current investment landscape and today offers both in spades.
Market Framework: Trade Truce or Just a Timeout?
U.S. and Chinese officials have agreed on a trade framework in London — a deal that looks more like a bandage than a cure. Rare earth exports will resume, and advanced U.S. tech sales to China may follow suit, but this is a stop-start process stitched together by leverage, not trust.
The language is telling. Commerce Secretary Howard Lutnick called it a framework to "implement the Geneva consensus" — more diplomatic than decisive. Beijing's delayed media response only underscores the fragility. Chinese state media, typically quick to trumpet Xi's wins, remained conspicuously silent for hours after the announcement.
For now, markets are cautiously optimistic, but one eye remains on President Trump's tariff playbook. With stocks rebounding and bond yields rising, the risk of renewed tariff brinkmanship is real — and potentially destabilizing heading into Q3.
Meanwhile, Treasury auctions this week are testing investor appetite for U.S. debt in the face of ballooning deficits. The $39 billion 10-year note sale today will be a key signal. As Komal Sri-Kumar aptly noted, "Sometimes things crack suddenly." That applies to bond markets as much as brittle trade truces.
Corporate Framework: Tech, Cars, and Quantum Hype
Tesla is finally putting dates to its long-teased robotaxi rollout — June 22 in Austin, with other states to follow. It's an audacious move at a time when autonomous regulation remains patchy, but also a reminder that Tesla's value proposition hinges increasingly on software, not just cars. Starting June 28, Musk claims new Teslas will drive straight off the production line to your home — literally.
Meanwhile, Nvidia CEO Jensen Huang struck a more bullish tone on quantum computing in Paris, calling it an "inflection point." This marks a significant shift from his previous skepticism that sent quantum stocks tumbling. Huang highlighted Nvidia's hybrid platform Cuda Q and emphasized near-term practical applications. With IonQ, Rigetti, and others bouncing, expect another speculative leg higher in quantum if Nvidia keeps the drumbeat going.
General Motors, on the other hand, is leaning into combustion — not code. A $4 billion investment in gas-powered vehicle production signals a pragmatic pivot as EV demand cools. The irony isn't lost on markets: GM, once positioning itself as a Detroit answer to Tesla, is now doubling down on the very vehicles it vowed to phase out by 2035. This may make financial sense in the near term, but long term, it raises strategic credibility questions.
In the UK, KKR and Stonepeak have raised their offer for Assura to £1.7 billion, outbidding rivals with a "best and final" all-cash proposal. Private equity clearly still sees value in healthcare real estate — particularly with UK gilt yields firming but not yet spiking.
Economic Framework: All Eyes on CPI
Today's inflation print is the main macro event. Expectations are for a 0.2% rise month-on-month and 2.9% core annual inflation. The New York Fed's survey earlier this week showed falling inflation expectations across the board — but that may reflect political sentiment more than anchored reality, as former Fed insider James Egelhof warned.
Egelhof's observation about inflation expectations following "political headlines" rather than the Fed's 2% target is particularly concerning. If expectations become unmoored from Fed guidance, it severely complicates monetary policy.
With fiscal concerns growing and Trump's trade agenda back on the front burner, inflation may become more politically shaped than policy driven. A hot CPI number could spike yields again and challenge the Fed's wait-and-see stance — particularly ahead of next week's FOMC.
Treasury Secretary Scott Bessent's role becomes even more critical. Bloomberg reports he's being considered as a potential Fed Chair replacement alongside Kevin Warsh, which would represent a significant shift toward market-friendly monetary policy.
Technology Evolution: IPOs, AI, and the Crypto Renaissance
The resurgence of tech IPOs — led by Circle and CoreWeave — underscores that this market is still very much in love with anything touching AI or crypto. Circle's post-IPO surge of 240% is a standout, but more importantly, it confirms the thesis that institutional demand for blockchain infrastructure is both real and resilient.
Carson Group's analysis reveals tech IPOs have gained an average of 108% from their deal price since 2024, while non-tech IPOs have risen "just" 49%. This isn't a rising tide — it's specific appetite for disruptive technology themes.
I maintain that Circle's success is just the first of several crypto-native companies to go public with strong momentum. Investor appetite isn't waning — it's rotating toward sustainable, revenue-generating crypto enterprises. The playbook from AI is now bleeding directly into crypto, with both sectors feeding off themes of decentralization, automation, and scalability.
Behind the scenes, OpenAI's deal with Google Cloud signals two things: OpenAI's insatiable compute appetite is pushing past Microsoft's ecosystem, and Big Tech remains entangled in competitive-cooperative relationships. In today's AI arms race, infrastructure isn't a moat, it's a meeting point.
Earnings Spotlight: Retailers and Pharma Navigate Headwinds
GameStop's Q1 results tell a familiar story, revenue down 17% as digital downloads dominate, but the company flipped to $44.8 million profit through aggressive cost cuts. That said, $35.5 million in impairment charges underscore that this turnaround isn’t all organic.
Meanwhile, Inditex missed expectations as tariff uncertainty complicates fast-fashion's global supply chains. Pharmaceutical giants Eli Lilly and Merck continue navigating uncertainty around Trump's drug pricing reforms. Both report ongoing administration discussions but acknowledge no clarity on implementation timelines, a regulatory overhang that will persist until concrete proposals emerge.
Starbucks CEO Brian Niccol notes "a lot of interest" in selling a stake in the China business, as the company looks to accelerate from 8,000 to 20,000 stores. Despite geopolitical tensions, U.S. consumer brands can still find willing Chinese partners for expansion.
Strategic Outlook: The Great Rotation Reversal
It’s gone under the radar, but U.S. equities have underperformed global assets year-to-date, a rare dynamic driven by Europe’s fiscal expansion, Japan’s reflation push, and strong commodity flows supporting EM. I don’t think that trend lasts much longer.
Multiple global spending packages are coming online, M2 is rising again, and liquidity conditions are turning more supportive. That backdrop favors risk assets and the big beneficiaries will, in my view, be crypto and tech.
The IPO window is reopening, breadth is improving, and retail participation is rising. The ingredients for a broader-based second-half rally are quietly aligning. I also see room for U.S. mid and small caps to participate more meaningfully, especially as real rates stabilize and inflation moderates.
The “sell the U.S.” trade has run its course. With the S&P 500 brushing up against record highs, the narrative may be about to reverse. Expect the second half of 2025 to look a lot more U.S.-centric, not because others falter, but because U.S. fundamentals reassert themselves.
Risk Considerations
The Fed's "wait and see" stance is a double-edged sword. If inflation surprises to the upside or bond markets revolt during auctions, risk assets could quickly reprice. The US–China framework, while progress on paper, remains thinly held together and vulnerable to renewed political shocks.
Meanwhile, rising debt levels globally are receiving more scrutiny, and the U.S. fiscal trajectory is becoming harder to ignore. Positioning needs to remain adaptive, with a tilt toward quality and optionality.
Closing Thoughts
The start of 2025 was dominated by rotation out of U.S. equities, out of tech, into the under-owned. But as summer unfolds, that trade looks increasingly stale.
The convergence of rising liquidity, stabilizing inflation, and reopening risk markets points toward a resumption of the prior leadership but this time, with a broader base. Tech and crypto still lead, but mid-cap growth and select cyclicals may finally get their moment.
Inflation prints, debt auctions, and trade deals may dominate headlines, but beneath the surface, the market is doing what it always does: repricing for growth. Real, scalable, monetizable growth.
Sometimes bull markets climb a wall of worry. Other times, they climb back to where they left off and break through it. With multiple tailwinds starting to align, this increasingly feels like the latter.
Please feel free to reach out to me on LinkedIn or by email if you would like help navigating this market environment or have any planning-related questions.
Dan Sheehan
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.