Stock Market Briefing #2 – An optimistic Fed does take some investor fears away
We discuss last week's Fed decision & commentary, consumer confidence, and interesting developments for Uber, Apple, Boeing, Starbucks, and many more!
These Stock Market Briefings will be a weekly recurring format, published every Monday before European markets open.
In these posts, I will take you through and share my thoughts on those news items and highlights that stood out to me over the last week, including big developments on the stocks I own and follow and macroeconomic and market developments. I will elaborate on news items and put data into a bit more perspective while hopefully sharing plenty of insights in a 5-10 min read.
Ultimately, with this early Monday briefing, I hope to update you on big developments that are worth considering before markets open again for another trading week!
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An optimistic Fed does take some investor fears away
Without a doubt, the biggest event of last week was the Fed interest rate decision, which turned out better than expected for investors, leading to some actual relief.
While the overall U.S. economic situation remains very concerning—consider a combination of high interest rates, sticky inflation, an emerging trade war, and slowing economic growth—the Fed claims it might not be as bad as it is perceived to be. Or, at least, that is how Powell’s commentary came across to investors.
Even as Powell took a more hawkish stance, the overall takeaway was positive. The commentary was nowhere near as bad as feared, and the Fed president saw little indication of a potential recession and downplayed the impact of tariffs, calling the effect “transitory.”
Yes, it is safe to say that pleased investors, relieving some heightened concerns.
Here is how we ended the week:
S&P 500 -> 0.08% 🟢
Dow 30 -> 0.82% 🟢
Nasdaq -> -0.3% 🔴
Stoxx Europe 600 -> 0.56% 🟢
Hang Seng -> -1.13% 🔴
Amid everything that is going on, a flattish week was probably the best we could have wished for… at least markets seemed to have bottomed a bit for now.
So, what did the Fed really say?
According to Powell & Co, hard economic data remains healthy so far, with solid economic growth and low unemployment levels, neither showing real weakness. Yes, sentiment surveys have been weak in recent weeks, weighing on investors, but the Fed is seeing no real tight correlation between consumer confidence and spending, with spending remaining healthy.
Indeed, it’s the consumer that keeps the U.S. economy rolling.
As a result, despite weak sentiment, the chance of a recession, despite rising a little, remains really low. In Powell’s exact words, “We don't make such a forecast. The chance of a recession may have risen, but not by much.”
This is all investors wanted to hear.
Still, the Fed increased its inflation forecast, decreased its growth projections, and updated its dot plot in a hawkish way.
It lowered its 2025 GDP estimate to 1.7%, down from a previous 2.1%, and is expected to remain at a similar level in 2026 and 2027. This goes combined with a healthy unemployment rate of 4.4% in 2025, expected to drop to 4.3% in 2026 and 2027.
Meanwhile, core PCE inflation is now expected to end the year at a relatively high 2.7%, revised up from 2.5% in December. This is expected to trend down to 2.2% in 2026 and finally reach 2% again in 2027. Note that all these numbers are now adjusted for current and expected tariffs.
As was already widely expected, the U.S. Federal Reserve (Fed) kept the U.S. interest rate flat after its meeting last week at 4.25%
Despite recent fears, sticky inflation, and upcoming tariffs, the dot plot hasn’t changed too much, and the Fed consensus still seems to be for an end-of-2025 interest rate of 3.75%, indicating two 25 bps cuts this year, which was very much in line with expectations still, and not a significant worsening in the dot plot as feared.
Yes, four members voted for no rate cuts in 2025, up from one in December, but the general consensus still stands at 3.9%, so it remains essentially unchanged, even as inflation remains too elevated at around 3%, explaining the slightly more hawkish Fed.
My expectation right now?
I estimate one 25-bps cut in 2025 right now. This is mainly because I expect higher inflation by the end of 2025 due to Trump’s tariffs. In a base-case scenario, I can’t see room for 50 bps of rate cuts in 2025, as I see inflation end the year at closer to 3%.
However, according to the CME FedWatch, the market is currently pricing in a much more dovish 100 bps worth of rate cuts, projecting an end-of-2025 U.S. interest rate of 3.25% - 3.50%, though expectations are spread out with a lot of uncertainty still out there.
Other Macro Highlights
Consumer confidence has hit the lowest level since the GFC
Last week, the consumer sentiment index report showed its lowest reading since 2009, with unemployment fears surging amid high economic policy uncertainty, high interest rates, sticky inflation, and upcoming tariffs.
The big drop in stock prices also didn’t help.
As a result, the Michigan consumer sentiment index over March plunged to 57.9 from 64.7, which is well below the consensus at 63.0.
Not great… though consumers tend to overreact rather quickly, let’s be honest.
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Notable movers and news items (Stock news)
Uber eyeing higher investments in India
According to recent reports, Uber is looking to acquire electric vehicle taxi startup BluSmart. BluSmart is an Indian fully electric ride-sharing company founded in January 2019. It has so far struggled for traction due to a high level of capital expenditure and limited charging infrastructure.
Yet, Uber sees some value, reportedly targeting its assets, including its fleet of over 5,000 electric vehicles operating in the Delhi-National Capital Region, Mumbai, Bengaluru, and Dubai. This way, the company likely aims to grow its presence in this emerging country, which it has so far done through partnerships.
In India, ride-hailing still has a user penetration of only 19%, even though the country is perfectly suited for it, with car ownership far from attractive. As a result, the market is estimated to be in for significant growth, with penetration growing to over 25% by 2029, driving market growth at a mid-teens CAGR.
I definitely believe Uber’s more aggressive move into India is a good one. This is a big and important market for the company to fuel growth.
How resilient are payment stocks in a recession?
According to Bernstein analysts, the answer to this question is a positive “relatively resilient.”
Why? Think about secular growth drivers such as a move from cash to digital that is still continuing, limiting the impact on processed transactions, the effect of inflation on volumes, and the recurring revenue streams remaining strong, to just name a few.
Looking back at the 2008-09 crisis, global GDP slowed by five percentage points, and inflation turned negative for a moment, yet card volumes still grew by low-single digits, and the number of transactions grew in the high-single digits.
Ultimately, unlike many believe, payment processors across the value chain, including Visa, Mastercard, Fiserv, Block, PayPal, and Adyen, aren’t impacted too much by a recession, with volumes likely remaining resilient.
For example, even during 2008-09, Visa still delivered 9% YoY growth, while Mastercard recorded 4% YoY growth. Now, I believe the impact of a deep recession could be more considerable today, with secular headwinds less strong, but I don’t expect growth to turn negative for these giants.
Ultimately, I believe it is safe to conclude the payment processing sector is a compelling one to invest in, whether we are in a bull or bear market.
Apple is poised for double-digit earnings growth through 2029… at least according to Evercore analysts.
Indeed, Evercore analysts now expect Apple to deliver double-digit EPS growth through the end of the decade, and looking at the Wall Street consensus, this seems to be the general expectation, even as revenue growth is only estimated to be in the mid-single digits.
Driving this EPS growth estimate is a bigger contribution from high-margin services, gross margin expansion via mix and pricing, growing operating leverage, and massive buybacks. Nowadays, you can also add AI to this list, with AI monetization likely being another tailwind for margins, with Apple’s strategy not requiring massive upfront investments in data centers and Nvidia GPUs.
This is actually an approach I much prefer (far lower operational risk).
Combined, this should lead to stable EPS and FCF growth, even as top-line growth might not be blinding.
Personally, I think the street is right on this one, and Apple remains a compelling long-term investment and a lower-risk investment than its big tech peers.
Meanwhile, there is also potential for some upside to current revenue estimates, driven by, among other things, iPhone market share gains and a potential revenue contribution from AI services.
Is a 30x earnings multiple too high to pay? Honestly, I am not sure—it might actually make sense… I’ll leave that up to you to decide.
Chinese electric vehicle leader BYD shocks the industry with a 5-minute charging breakthrough
BYD has already been conquering the electric vehicle market in recent years, beating the likes of Tesla and Volkswagen to become the largest supplier of EVs.
Nevertheless, it managed to once more shock the market last week with its Super e-Platform. Reportedly, the new charging technology allows electric vehicles to be charged at speeds comparable to refueling a gasoline car, providing up to 400 kilometers (approximately 249 miles) of driving range in just five minutes.
At a charging speed of 1,000 kilowatts, this is miles ahead of Tesla’s charging technology. For now, the company plans to roll the technology out in China only, across roughly 4,000 charging stations.
This really seems to be a game changer, significantly reducing range anxiety, which is still the main reason consumers choose to stay away from EVs.
BYD only seems to be growing its edge over the competition. Shares jumped 13% on the news.
Boeing wins next-gen fighter jet deal, potentially worth hundreds of billions
Last Friday, the news finally broke: Boeing edged out Lockheed Martin, being awarded the contract to build the U.S. Air Force's most sophisticated fighter jet set to replace the current F22 Raptor built by Lockheed.
The assignment is known as Next Generation Air Dominance, or NGAD, and the engineering and manufacturing development contract alone is worth more than $20 billion, though over the lifespan of manufacturing, likely lasting multiple decades, this contract could be worth hundreds of billions.
Finally, some much-needed good news for Boeing. Is this the government throwing it a bone? Who knows… One thing is for certain: the U.S. government would never let Boeing go under, no matter how bad it would get.
Europe’s arms race is massively benefitting German defense giant ThyssenKrupp
ThyssenKrupp shares are already up over 150% so far in 2025, and the pop didn’t come out of thin air. The company is currently firing on all cylinders, and all signs point to an amazing few years ahead for it, as Europe is heavily investing in its defense.
Unsurprisingly, European countries boosting their defensive capabilities to be less dependent on the U.S. prefer to spend their money within the continent, so ThyssenKrupp is tremendously well positioned, being a German defense giant.
The company’s navel segment—ThyssenKrupp Marine Systems—is doing very well, even leading to the segment likely going public later this year and splitting off from the ThyssenKrupp group.
Interestingly, after the recent approval of a major fiscal package in Germany, likely allowing the country to spend hundreds of billions on its defense, and the $800 billion package announced by the EU, ThyssenKrupp Marine Systems CEO Oliver Burkhard believes its market will triple by the end of the decade.
Demand is simply growing exponentially, and the company is best positioned to benefit.
How quickly things can change, right?
CEO Brian Niccol is pleased with progress at Starbucks
Simplifying menus, accelerating checkout, free refills, and increased marketing efforts. Starbucks’s Brian Niccol has completely revamped Starbucks’ strategy over recent months to bring back the good feel in its locations and improve customer satisfaction.
During the company’s annual meeting last week, Brian Niccol said he was pleased with the early reaction to the changes, creating a more welcoming environment in its stores. A nice indication of this was a 300% YoY increase in customers who choose ceramic mugs and glasses to sit and stay in cafés, which is exactly what the company is aiming at.
Meanwhile, unlike what many believe, Starbucks is a relatively affordable option for a fresh brew. Yes, the company is more expensive than other large chains like Dunkin’ Donuts but lower priced than the average independent coffee shop.
Some good initial signs for Starbucks
Some notable analyst calls from last week
🟢 BofA upgrades Intel ($INTC) to Neutral.
🔴 Wolfe downgrades Verizon ($VZ) to Neutral.
🟢 Kepler upgrades Novo Nordisk ($NVO) to Buy.
🟢 D.A. Davidson upgrades Microsoft ($MSFT) to Buy.
🔴 Barclays downgrades Emerson Electric ($EMR) to Sell.
🟢 Citizens upgraded Unity Software ($U) to Buy.
🟢 Moffett Nathanson upgrades Netflix ($NFLX) to Buy.
🟢 D.A. Davidson upgrades Monday ($MNDY) to Buy.
🟢 Argus upgrades Starbucks ($SBUX) to Buy.
🟢 Citi upgrades Texas Instruments ($TXN) to Buy.
🟢 Oppenheimer initiates coverage of Lam Research ($LRCX) with a Buy.
That then brings us to the end of this week’s Stock Market Briefing. Until next week!
Cheers!
