JD Straight Up - 9Jun25 - Keep Calm and Trade On

Keep Calm and Trade On

Drulard Family Capital Fund

Fortnightly Macro View

JD Straight Up:

S&P 500 at 6001 – up 2% from 5889 two weeks ago

VIX at 18 – down 5% from 19 two weeks ago

10yr Treasury yielding 4.51% (up 2% from 4.43% two weeks ago)

Agg (US Aggregate Bond Index) at 97.32 – flat from 97.50 two weeks ago

Gold at 3333 per oz (up 2% from 3262 two weeks ago) - up 28% YTD, 45% YoY, 95% over 5 years

Crude Oil (WTI) at 65 per barrel (up 3% from 63 two weeks ago)

Bitcoin at 108k (flat from 108k two weeks ago)

JPM shares at 264 (flat from 264 two weeks ago)

Deutsche Bank shares at 28.14 (up 2% from 27.51 two weeks ago)

Truist shares at 40.90 (up 3% from 39.82 two weeks ago)

Blackstone shares at 140.65 (up 2% from 138.45 two weeks ago)

Magnificent 7 Index at 332 (up 1% from 331 two weeks ago)

US unemployment: at 240,000 in latest claims – up 6% from 227,000 two weeks ago - highest in 10 months

EUR at 1.14 USD (up 1% from 1.13 two weeks ago) - highest since Feb '22

GBP at 1.35 USD (up 1% from 1.34 two weeks ago) - highest since Feb '22

Macro Environment

Inflation in US continues at 2.3% while EU dips to 1.9%.   ECB continues to cut rates (key interest rate at 2%).  US Fed holding fed funds rate firm at 4.33%.  US unemployment persists at the historically low level of 4.2% while EU is at 6.2%.  US real GDP was down 0.2% in 1Q25 while EU was up 0.6% in 1Q25.  US national debt is $37trn with a debt to GDP ratio of 123% while EU is estimated to be $19trn with a debt to GDP ratio of 87%.  Wars continue in Ukraine and Gaza with signs of escalation.  Trade negotiations continue between US and its trading partners with ongoing tariff threats and application.

Macro View

The US economy continues to produce numbers showing strength and stability despite CEO and consumer confidence numbers showing declines.  It is hard if not impossible to parse the statistics from the media sensationalism and interpretation.  Further complicating this is the frequent restatement of official statistics that lead to entirely contradicting conclusions to first prints.  The market is awash with experts deriving incontrovertible insight from every set of data that is released, but never agreeing on direction or conclusion.  The latest consensus is to just keep calm and stay invested through the uncertainty.  Keep allocating capital to businesses, investments and risk trades.  The S&P crossed 6000 again while the 10-year Treasury hovers at 4.5% and gold breaches a record 3300.  More to the point on risk assets, Bitcoin trades at 108k for a market cap exceeding $2trn.  This $2trn in value was manifest in 5 years, producing a 1000% return.  The S&P is up almost 90% in the same five year period.

Relevance

There is no good explanation for the market hiccup in April and the VIX spike over 50 beyond tariff uncertainty.  The uncertainty continues while the price of risk assets recovered and continues to climb.  Institutional money managers continue to receive additional capital from pensions, endowments, 401k, IRA, and other inflows and they continue to deploy it.  Earnings and money supply both continue robust so excess capital will continue to be allocated and drive asset prices accordingly.   Additionally, $2-3trn of longer dated Treasury securities will mature in 2025 and that capital will be redeployed.  The 30yr auction this Thursday will give an indication whether it is staying in the same asset class and duration or shifting elsewhere.  Once again, the demand for Treasuries will be central to all things including US economic growth, liquidity, solvency, and overall money flows.

Head Scratchers

1 - Is the move to make private credit investing available to retail investors a sign that we are past the market top as the smart money makes room for Joe Sixpack under the banner of 'democratization' of private markets?

2 - How big is the risk of quantum compute to blockchain encryption and in particular Bitcoin?

Drulard Family Capital Fund

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#19- 9Jun25