U.S. Downgrade, AI Surge, and Retail Resilience

Analyst Weekly, Might 19, 2025

International markets are flashing indicators that matter for the street forward, and savvy traders are paying consideration. From AI growth into new areas to retail turning worthwhile and governments recalibrating commerce and taxes, the subsequent section of the cycle is taking form. Right here’s what’s transferring markets and what it means on your portfolio.

Uncle Sam’s Not AAA Any Extra

Moody’s simply pulled the US’s ultimate AAA score, citing ballooning debt, a $2T+ annual deficit, and political gridlock over taxes and spending. However for a lot of out there, this was already priced in. The 27-year period of fiscal stimulus resulted in 2023 and web curiosity funds have quietly climbed to 18% of tax revenues, far above historic norms. It’s clear that tariffs and paying for tax minimize extensions are indicators {that a} new interval of austerity has arrived.

The irony? Moody’s is likely to be late to the occasion. In 2011, S&P downgraded the U.S. after Congress handed $2T in cuts. Bond yields fell. Now, Moody’s is flagging deficits tied to tax minimize extensions that haven’t even handed whereas ignoring tariffs, which operate as a $2T consumption tax that really helps income. Tariffs damage progress, however they assist the Treasury: a trade-off the market appears to know higher than the score businesses. Investor Takeaway: The downgrade displays what markets already know: we’re in a brand new fiscal regime outlined by austerity through tariffs and caps, not stimulus. Control Treasury yields and financial negotiations however don’t overreact to the downgrade itself. Historical past exhibits these calls typically lag the basics.

Britain’s Huge Beat, Meet Huge Breach

The UK kicked off 2025 with a bang: GDP rose 0.7% q/q in Q1, topping forecasts and main the G7. Robust shopper spending and industrial output did the heavy lifting, giving the federal government a story win. Whereas questions stay round contemporary tax will increase and commerce tensions, the expansion beat exhibits the UK economic system nonetheless has momentum. In different phrases, Britain’s economic system is successful the dash, however the marathon has obstacles forward (commerce coverage being a key one).

In the meantime, a really 2025 drawback hit a British retail icon. Marks & Spencer (MKS.L) was sidelined by a large cyberattack that knocked out its web site and app for over three weeks. The ransomware-style assault left M&S unable to take on-line orders since late April, with some retailer cabinets even operating low as techniques went offline. The retailer confirmed hackers stole sure buyer knowledge (fortunately no cost data) and disruption has price it an estimated £30+ million in revenue to date. M&S shares have tumbled about 14% because the Easter weekend when the cyber woes started. The corporate is working to get operations again to regular, however the incident is a blunt reminder that even century-old manufacturers want cutting-edge cyber defenses. Investor Takeaway: A powerful economic system doesn’t immunize firms from tech threats: traders within the UK market should steadiness the encouraging large image (strong GDP, enhancing sentiment) with due diligence on company-specific vulnerabilities (like cybersecurity resilience). Control commerce coverage strikes too, as any post-truce tariff flare-up may rapidly flip Britain’s shock growth right into a bust.

Supply: Bloomberg, As of Might 18, 2025.

Desert Offers Gas AI Chip Rally

It was raining oil cash on AI shares final week. Nvidia and pals noticed a mid-week surge after a high-profile pit cease within the Center East. New partnerships had been introduced to provide chips for a Saudi AI initiative, sparking a rally throughout AI and data-center names. The market actually preferred the sound of “AI oasis”: Nvidia inventory jumped about 4%, AMD leapt 5%+, and server-maker Supermicro (SMCI) rocketed for a second straight day. Even beforehand controversial names joined the occasion: Palantir hit a report excessive and Tesla climbed 3%. Analysts famous these petro-dollar fueled offers may offset US-China export curbs that had threatened chipmakers’ gross sales. (Recall that Nvidia lately warned of a $5.5 billion hit from new chip export limits to China.) Investor Takeaway: The AI gold rush goes world. Deep-pocketed newcomers are investing closely in tech infrastructure, a bullish signal for chip and cloud distributors powering the AI growth. For traders, it means the AI rally has broadened past Silicon Valley, probably extending the runway for the sector’s progress whilst US-China tensions simmer.

Walmart Lastly Cashes In On-line

America’s greatest retailer simply hit a milestone that even Amazon would applaud: Walmart’s e-commerce arm turned worthwhile. In its newest earnings, Walmart revealed that US on-line gross sales surged 21% final quarter and, for the primary time ever, the digital enterprise made cash. Many years of heavy funding in achievement and supply are lastly paying off – actually. Identical-store gross sales had been robust (+4.5%), however the true star was the clicks over the bricks. The corporate has been taking part in on-line catch-up with Amazon for years, and now these efforts (like curbside pickup and market growth) are translating into black ink. However the world’s largest retailer additionally despatched a warning shot: tariff-driven value hikes are coming. CFO John Rainey stated customers will begin seeing will increase in Might, as provide chain volatility and “an absence of readability” on commerce coverage make near-term planning robust. Investor Takeaway: Walmart is doing what few retailers can, balancing offense and protection with precision. It’s gaining share, investing in long-term progress, whereas on the similar time managing near-term headwinds higher than friends like Goal. The corporate is clearly navigating tariffs higher than most (via sourcing diversification and stock flexibility). The inventory isn’t low cost, however that’s the price of high quality in at this time’s retail. Walmart stays one of many few names in retail that may navigate uncertainty and continue to grow.

Copper: Electrified, Scarce, and (Barely) Tariffed

Copper simply acquired hotter. Structurally, demand is being supercharged by the whole lot from EVs and photo voltaic panels to AI knowledge facilities (sure, servers want severe energy). China, which buys over half the world’s copper, has rolled out infrastructure-heavy stimulus for 2025, including extra gas to the fireplace. However provide? That’s the place it will get tight. Chile and Peru (which mine 40% of world copper) are battling falling ore high quality, political disruptions, and water shortages – a combination that’s slowing down manufacturing simply as demand ramps.

Then got here a curveball: the US is probably (not but imposed) implementing a 25% tariff on copper imports, spooking merchants and briefly flooding inventories, which despatched costs tumbling. A 90-day truce with China has helped stabilize sentiment, however the market’s nonetheless edgy. Investor Takeaway: For traders, the setup stays complicated: structurally bullish, however tactically unstable. UK-based publicity ranges from direct copper exposures like WisdomTree Copper, to diversified miners (ANTO.L, GLEN.L, RIO.L) and broader pure sources funds (BRWM). Every brings totally different sensitivities to copper value shifts and to the coverage dangers now baked into the commerce.

Supply: Bloomberg, knowledge as of Might 18, 2025.

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