Market Pulse 2025: Data, Debt and Dominant Trends

This is a review of 16 charts…

I hope they spark some thoughts for you, as happens when Tony Pasquariello, head of the hedge fund department at Goldman Sachs, encounters them.

I am not compiling them with the intention to make a bullish or bearish analysis, nor to present a single storyline.

That said — and given how much smoke and noise is raised in 2025, as seen yesterday — several very strong themes remain in play.

1. Let’s start with inflation.
Although recent trends are encouraging, the implementation of tariffs will most likely lead to a rise in core PCE in the second half of 2025 — from 2.5% currently to 3.6% by the end of the year (data from Ronnie Walker).

2. However, the market looks beyond this adjustment
…effectively treating it as a one-off event.

Think of the 5y5y forward inflation expectations, which have remained in an extremely narrow range since spring 2022.

3. But debt sustainability remains an issue
So market experts are less worried about inflation restarting. The real question is around debt sustainability.

While most of the US interest rate curve has remained narrow in recent years, the long end again looks riskier. Looking at this in perspective — these are 30-year US yields. Even after some relief in recent weeks, I expect the market to remain cautious and tense at every new long-term debt auction.

4. Divergence between the dollar and bonds
…which brings us to a point Dom Wilson and Vicky Chang have been working on for a while – pay attention to the divergence between real 30-year US yields (white line) and the dollar (green line).

5. A challenge for the dollar
The last point leads to another — a main challenge for the dollar is that it remains expensive according to multiple valuation models (data from Lexi Kanter).

6. Moving to stocks, I start with US homebuilders.
Two caveats: (1) I may be overdoing illustrating percentage changes within a cycle; (2) I’ve looked at this chart for a whole week and still don’t have a definite conclusion. Considering the risks with long yields and very poor supply and demand fundamentals for housing, one could easily worry about these stocks. On the other hand, despite historical volatility (and dramatic crashes), the long-term uptrend is impressive. Ultimately, this is an unpredictable segment of the market — you decide how to act.

7. Nuclear energy
…speaking of provocative charts — and after our recent work on nuclear energy — pay attention to the price movement of a basket of 20 global companies exposed to uranium/nuclear energy.

8. Defense
…and here it is — price movement of global defense stocks. The rally since the start of the year among European companies is well documented. Also note that our basket of South Korean companies is up by — hmm — 127% since the start of the year. Also, see the movement in Japan.

9. Technology
…now moving to market capitalization, which has the greatest influence. Starting with a global view — this is real earnings growth of tech companies compared to non-tech (data from Giovanni Ferrantini).

10. The dominance of the “Magnificent Seven”
…which brings us back to this — earnings growth of the “Magnificent Seven” compared to the other 493 companies (data from Giovanni Ferrantini).

11. Capital expenditures investments
…sticking to the topic — these are capital expenditures of the “Magnificent Seven.” The jump after the appearance of ChatGPT speaks for itself. Also note the expected growth according to consensus (by Giovanni Ferrantini).

12. Artificial intelligence
…bringing it all together, see our dual positioning — leaders vs laggards in the US AI sector. As one of my bosses says — AI deployment and returns follow a slow… slow… slow… FAST arc. I’m curious whether today’s move in BRCM confirms a breakout or not.

13. Positioning
In recent weeks there has been a decent wave of new issuances (which I view as positive), but the main story is the ongoing — and massive — share buybacks by companies (data from Jenny Ma).

14. Systematic flows
…this shows the dollar value of futures on global stock indices held by systematic traders.

As clearly seen, current exposure is about 5 out of 10, with an update coming tonight — consistent with my argument that speculative positioning is no longer a major supporting factor, but is also not a brake (data from Paul Lazerovich).

15. Discretionary crowd trading
…the previous chart showed the systematic crowd, and this one — the discretionary (data from Vincent Lin). Conclusion: May brought the largest nominal buying of global stocks in history (the pace slows in June, but there is still a net buying bias).

The conclusion: although positioning may expand from here, the first wave of hedge fund rebalancing is behind us…

16. Gains/Losses YTD vs Sharpe ratio
…final chart: an overview of returns and Sharpe ratios year-to-date (by Jenny Ma).

Several things stand out to me: gold and bitcoin are again top performers as a store of value… US high-yield bonds surprise with good Sharpe and high dispersion… yes, US stocks lag their global peers (both developed and emerging markets)… and yes, US tech is starting slowly (BUT, given the points above, I wouldn’t write them off).

Given all this, Pasquariello reminds clients of a phrase used for George Soros:

“The secret was in preserving capital, plus a few home runs.”

In other words, one could argue this is exactly the type of market forming — tough, sometimes uneven, but not without opportunities and big trends.