2025 Week 22

1. A Triple Downgrade Reality

Moody’s has now joined S&P and Fitch in downgrading U.S. Government debt from AAA status—completing a historic trifecta of lost pristine credit ratings. The rationale is consistent: persistent large fiscal deficits and rising interest costs. As successive U.S. administrations have failed to rein in spending, the government’s fiscal path appears increasingly unsustainable.

Key Takeaway: All three major credit rating agencies now assign sub-AAA ratings to U.S. debt, highlighting long-term fiscal concerns for investors.

2. “One Big Beautiful Bill” Stirs Fiscal Alarm

The House narrowly passed the “One Big Beautiful Bill Act” with sweeping tax cuts and elevated spending that could widen deficits by $3.3 trillion over a decade, according to the CBO. Crucially, spending cut promises were not codified, making future savings uncertain. The bill also raises the debt ceiling by $4 trillion.

Key Takeaway: With deficits likely to rise, this bill deepens the structural fiscal imbalance, despite lacking enforceable spending cuts.

3. Bond Market Pushes Back

Investors responded swiftly to fiscal developments. The 30-year Treasury yield surged above 5.1%, its highest since 2007, signaling growing skepticism about long-term U.S. fiscal health. Globally, Japan’s 30-year bond yield hit a record 3.00% amid similar debt pressures and persistent inflation.

Key Takeaway: Bond markets are reacting sharply to higher deficit projections and inflation risks, driving long-term yields to multi-year highs.

4. Bitcoin and Gold Surge as Alternatives

As fiat currency concerns intensified, investors turned to alternatives. Bitcoin reached a record $112,000 before settling around $109,000, while gold climbed 6% to $3,360 per ounce, continuing its strong year-to-date run. The $GLD ETF is on pace for a record year, up 28% YTD.

Key Takeaway: Bitcoin and gold are increasingly viewed as hedges against inflation and sovereign debt risks.

5. Housing Market Faces New Pressure

U.S. existing home sales declined again in April, down 0.5%—the slowest pace for the month since 2009. Rising inventory (+16.7% YoY) and unaffordable mortgage rates are weighing heavily on the housing sector, triggering the first home price decline since 2022.

Key Takeaway: Rising supply and constrained affordability are placing renewed downward pressure on U.S. home prices.

6. Global Equity Rotation and Money Supply Milestone

This year marks a dramatic shift in equity performance: the S&P 500 is down 1%, while Eurozone stocks are up 24% and international markets overall by 14%, signaling a reversion after 16 years of U.S. outperformance. Meanwhile, U.S. money supply hit a record high in April for the first time in three years.

Key Takeaway: Global equities are rotating out of U.S. dominance just as monetary expansion quietly resumes.

7. Tariff Talk: More Smoke Than Fire?

Despite loud rhetoric around a proposed 50% tariff on EU imports beginning June 1, markets have grown wary of taking such statements at face value. Policy inconsistency continues to undermine confidence in trade stability.

Key Takeaway: Tariff announcements remain unreliable and are often walked back, adding volatility without clear outcomes.

Next week’s focus turns to inflation data, global central bank commentary, and signs of stabilization—or further stress—in sovereign debt markets.

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