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Macrosynthesis

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TLDR: Euphoria Meets Fragility as Rally Collides with Reality

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Markets are ripping higher—up 18% off April lows—powered by a tariff truce with China, trade deals, and large investments in the U.S. economy. Retail flows are strong, volatility is low, and the S&P 500 is back in the green for the year. But beneath the surface, issues remain. Trump’s tax cuts bill just failed in Congress. Consumer sentiment hit its second-lowest level ever. And late Friday, Moody’s lowered the U.S.’s AAA credit rating, citing runaway deficits and surging debt costs—sending futures sharply lower into the weekend. Investors are now caught in a crosscurrent: bullish momentum driven by soft inflation and resilient earnings colliding with fiscal chaos and macro fragility.

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Trump Touts Success Raising Trillions in Middle East Trip

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On May 16, 2025, the White House announced that President Donald J. Trump’s first official trip secured over $2 trillion in investment deals for the U.S., including a $600 billion commitment from Saudi Arabia. These agreements, aimed at boosting American industry and economic growth, highlight Trump’s "America First" agenda and focus on strengthening Gulf Region ties. Prominent CEOs, including Nvidia’s Jensen Huang, Amazon’s Andy Jassy, and Palantir’s Alex Karp, praised Trump’s leadership, crediting his business acumen for enabling strong execution and fostering U.S. exports.
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Boeing landed its biggest deal when Qatar Airways placed orders for 160 jetliners plus options to buy 50 more during President Donald Trump's visit to the Gulf Arab country. GE also benefits from the massive deal - Boeing's largest order ever. Qatar Airways is also purchasing over 400 GE9X and GEnx jet engines to power its newly ordered Boeing 777-9 and 787 aircraft.

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Recession Whiplash: From Certainty to Shrinking Odds—But a Credit Wake-Up Call Looms

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Not long ago, a U.S. recession was seen as very likely. But with inflation cooling, earnings growth holding up, and rate cut hopes possibly returning, forecasts are shifting. Soft-landing optimism has replaced hard-landing fears. Then came a stark reminder of the risks still lurking: Moody’s stripped the U.S. of its last AAA rating, warning of unsustainable deficits and mounting interest costs.
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With debt now over $36 trillion and projected to hit 134% of GDP by 2035, the downgrade shows deep fiscal cracks—just as investors race back into risk. It raises a bigger question: is this another macro alarm investors will ignore… or the spark that breaks momentum? If history is an indicator, investors may embrace the "sell in May and go away" mantra of old.

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Morgan Stanley Vs Goldman Sachs

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While the rally charges ahead, not all voices are convinced it has staying power. Morgan Stanley’s Lisa Shalett sees a turning point ahead, arguing that the rebound in tech-heavy indices is masking deeper cracks in fundamentals. She points to slowing revenue growth among the Magnificent Seven and weakening EPS momentum across the board. Since peaking in December, top AI names have faced rising capital expenditures, falling free-cash-flow yields, and what she calls a “capex arms race” that may not end well. While the White House’s tariff pause lit the fuse under the April rally, Shalett believes much of the AI-driven upside is now priced in—and urges clients to rotate into under-owned sectors like financials, energy, and healthcare. Her view adds to the growing divide: on one end, people are piling back into tech; on the other, Wall Street veterans are looking to diversify.
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In sharp contrast, Goldman Sachs is doubling down on the rally. Their desk raised its S&P 500 target to 6,500, citing improving fundamentals, tariff de-escalation, and a dovish inflation backdrop. They argue this rally isn’t overbought—it’s under-owned. Commodity Trading Advisors (CTAs)—quant funds that adjust equity exposure based on price trends—are projected to inject $25B into markets over the next month, while institutional net holdings remain near their lowest levels since last summer.
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Even as sentiment shifts, core positioning hasn’t caught up. April’s “Liberation Day” selloff reset exposure, and now, with macro data stabilizing and inflation surprising to the downside, Goldman is calling for a continued squeeze higher. Their tactical playbook? Stick with MegaCap Tech as the default risk trade, and don’t fight the tape just yet. But with the S&P already up ~20% since the April lows, it’s becoming a momentum game—where lagging investors are being forced in, largely due to FOMO.
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Meanwhile, the underlying story is that there is growing stress at the lower end of the income spectrum, as evidence by rising delinquency rates across all major debt categories. As student loan forgiveness and FHA loan forgiveness programs carried out for years under the Biden Administration have been shut off, financial stress is creeping into the banking system.
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Most economic analyses focus on lagging indicators. But the earliest signs of trouble often come from industries closest to day-to-day consumer behavior—places where spending is casual, tips are common, and splurges are discretionary.
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Escorts, strippers, bartenders, DoorDash drivers, and even hairstylists are feeling a shift. Fewer tips, fewer clients, and more bargaining are starting to define 2025’s consumer mood.

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Inflation Cools, But Walmart Feels the Squeeze

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April’s CPI offered some relief: headline inflation slowed to 2.3% YoY, the softest since early 2021, and core inflation undershot for a third straight month. Yet beneath the surface, retailers are feeling the strain. Walmart posted $165.6B in Q1 revenue (+2.5%) with EPS beating forecasts, but profits dropped 13% YoY as tariff-driven import costs climbed. CFO John Rainey warned that price hikes on goods like bananas and car seats are coming by late May. With two-thirds of inventory sourced domestically, Walmart is partly insulated—but the remaining exposure is weighing on margins. For now, corporate America is absorbing the tariff pain per Trump's request.

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Sentiment Plunges as Tariff Fears Outrun the Data

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Consumers, however, aren’t waiting. Despite tame inflation prints, sentiment collapsed to 50.8 in May—the second lowest on record—as fear of tariff-driven price hikes took hold. Nearly 75% of respondents cited tariffs unprompted, and inflation expectations jumped to 7.3%, the highest since the early ’80s. This disconnect between perception and data is now driving behavior. Households are pulling back, with Walmart flagging weakened demand in key categories and suspending profit guidance due to volatility. The fear itself—rather than actual inflation—may now become a self-fulfilling drag on consumer demand just as we saw in 2022, when predictions of incoming economic "hurricane" never materialized but still changed behavior across businesses and consumers.

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GOP Fractures Stall Trump’s “One Big Bill” Agenda

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Behind the market rally and inflation headlines, Washington is locked in gridlock. On Friday, Trump’s sweeping tax-and-spending package—meant to be the centerpiece of his second-term economic agenda—was blocked in the House Budget Committee. The bill aimed to bundle tax cuts, expanded work requirements for Medicaid, and rollbacks of Biden-era green subsidies into one reconciliation package. But four Republican hardliners—Reps. Chip Roy, Ralph Norman, Andrew Clyde, and Josh Brecheen—voted with Democrats to sink the bill, citing insufficient spending cuts and a lack of deficit reduction.
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The failed markup exposed growing fractures inside the Republican party. Fiscal hawks are demanding faster rollbacks of clean energy incentives and immediate Medicaid reforms to cut costs. Moderates from high-tax states are fighting for expanded state and local tax deductions. Speaker Mike Johnson now faces the daunting task of reworking the package over the weekend, with Trump himself pressuring holdouts to fall in line. The clock is ticking: without republican party unity, the bill risks dying in committee.

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What’s in the Tax Bill: Tax cuts and More Gov't Spending Plans

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The bill seeks to make Trump’s 2017 tax cuts permanent, expand the standard state and local tax deduction which helps support home buying, increase the child tax credit, eliminate clean energy subsidies, and introduce MAGA savings accounts for children which provides a $1,000 government-paid savings account for every child born during Trump's term. It also creates new tax breaks like zero tax on tips and overtime, expands health savings account access, and imposes work requirements for Medicaid recipients. On immigration, it limits access to federal benefits for undocumented individuals. Critics argue the bill adds to the deficit despite these cuts, while supporters claim it’s a long-overdue correction to Biden-era spending and regulatory expansion.
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Just hours after the House Budget Committee torpedoed Trump’s flagship tax package, Moody’s delivered another blow: a downgrade of the U.S. credit rating from Aaa to Aa1. The agency cited soaring deficits and rising interest burdens as its reasons. While Trump’s bill promised $1.5T in spending cuts, Moody’s warned those efforts are unlikely to reverse the trajectory of a debt load projected to hit 134% of GDP by 2035.
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The White House lashed out, calling the downgrade politically motivated, and blamed long-time Trump critic Mark Zandi—despite him working for a separate Moody’s entity. But the numbers are harder to spin: deficits remain near $2T annually, and interest payments are now a dominant line item on the federal ledger. With the tax bill stalled and creditworthiness under pressure, bond markets are bracing for higher yields next week, as investors reassess the long-term sustainability of U.S. fiscal policy.

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What’s Going On With China?

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Markets may celebrate the 90-day U.S.-China tariff pause, but tensions persist. Freight shipments from China jumped nearly 300% as firms rush to beat a potential tariff snapback, straining ports ahead of peak retail season. China sold $27.6B in U.S. Treasury bonds in March, falling to the No. 3 U.S. debt holder—a sign of decoupling from the U.S.

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Last Week's Market Performance

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Markets rallied sharply on a surprise U.S.-China tariff truce, sending the S&P 500 up 5.3% and the Nasdaq up 7.2%. April CPI came in cooler than expected. Big Tech led gains (Info Tech +8.1%, Consumer Discretionary +7.7%), while Super Micro (+44%), NRG (+33%), and Tesla (+17%) topped S&P winners. UnitedHealth plunged 23% on bad earnings, a CEO departure, and rumors of a criminal investigation into fraudulent billing practices. Globally, India rose 3.6%, Germany 1.1%. Oil climbed 2.4%, gold slid -4.7%.

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Upcoming Events This Week

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This week in the U.S., attention will center on tariff developments after President Trump signaled plans to impose new rates via formal letters to trading partners. A series of speeches from Federal Reserve officials could offer clues on future rate moves, especially as inflation data cools. Economic releases include S&P Global’s flash PMIs, expected to show slowing growth in manufacturing and services, alongside home sales reports—new sales are likely down, while existing sales may hold flat. Major earnings from retailers like Home Depot, Lowe’s, and TJX, and tech firms Intuit and Palo Alto Networks, will also shape sentiment.

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Company News

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LevelFields AI Stock Alerts Last Week

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KindlyMD (KDLY) Rockets +250% on Bitcoin Merger NewsKindlyMD surged 250% after merging with Bitcoin-native firm Nakamoto, aiming to launch a Bitcoin treasury model for healthcare. Led by David Bailey, the move aligns crypto infrastructure with healthtech, positioning KDLY at the frontier of decentralized finance and patient services

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Chegg (CHGG) Surges +30% After Announcing Major Workforce CutChegg rallied 30% after announcing a 22% workforce cut, a response to mounting pressure from AI chatbots. The company plans to pivot toward a leaner, AI-integrated model—seen by investors as key to defending margins and reviving growth.

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Berkshire Loads Up on STZ, Burry Bets on Estee Lauder

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Berkshire Hathaway made notable shifts in Q1 2025, dramatically increasing its stake in Constellation Brands (STZ) by 113.5%—adding over 6.3M shares worth $1.2B. The firm also added to Domino’s (DPZ) and HEICO (HEI.A), while exiting Citi (C) and Nubank (NU). Notably, Berkshire’s POOL position surged +144.5%, signaling confidence in consumer discretionary.
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Meanwhile, Michael Burry’s Scion Asset Management went all-in on a single name—Estee Lauder (EL)—which now makes up 50% of the portfolio after adding 100,000 shares. Burry completely exited 13 positions including Alibaba (BABA), Baidu (BIDU), JD.com (JD), and Molina Healthcare (MOH), suggesting a full pivot away from China exposure and healthcare.
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Both moves reflect contrasting bets: Berkshire doubling down on U.S. consumer staples and discretionary names, while Burry consolidates into a high-conviction play in beauty amid macro volatility.

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UnitedHealth in Turmoil as DOJ Opens Criminal Probe

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UnitedHealth Group (UNH) is under criminal investigation by the Department of Justice for alleged Medicare fraud tied to its Medicare Advantage business. The probe, active since mid-2024, follows earlier civil inquiries into inflated diagnoses used to boost government payments. Though the company denies wrongdoing and says it hasn’t been officially notified, investor reaction has been swift.
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Shares have plunged nearly 50% YTD and fell another 13% following news of the investigation, wiping out over $300 billion in market cap. Compounding the chaos, CEO Andrew Witty abruptly stepped down this week amid mounting scrutiny and rising medical costs. Former CEO Stephen Hemsley has returned to steady the ship.
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The fallout adds to an already brutal stretch for the insurer, which has faced a historic cyberattack, public backlash over executive controversies, and a DOJ lawsuit targeting kickback schemes across the Medicare Advantage sector. The risk of UNH being dropped from the Dow is now on the table.

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Coinbase Under Scrutiny for Inflated User Metrics Amid Data Breach

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Coinbase confirmed it's under SEC investigation for possibly overstating user counts in past filings—an inquiry that began under Biden and continues under Trump’s crypto-friendly SEC. The probe centers on the now-discontinued “verified users” metric, which may have overstated actual engagement.
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Compounding the issue, hackers recently stole customer data and demanded a $20M ransom, with potential fallout reaching $400M. Despite the scrutiny, Coinbase will join the S&P 500 next week and continues expanding globally, as CEO Brian Armstrong eyes its evolution into a leading financial app.

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Virgin Galactic Soars +35% on Narrower Loss, Delta Class Launch Plans

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Virgin Galactic surged 35% after posting a smaller-than-expected $2.38 Q1 loss and revealing launch timelines for its Delta Class SpaceShips. Cargo flights begin in 2026, followed by higher-priced passenger missions. Operating costs fell 21%, and a second spaceport in Italy is under review. SPCE is still down 25% YTD but gaining altitude on long-term space tourism hopes.

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This is not financial advice. All information represent opinions only for informational purposes. Given the vast number of stocks we cover in these reports, assume staff covering stocks have positions in stocks discussed.
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Have feedback or a request for specific data? Drop us a note at support@levelfields.ai

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