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Is The Market Turning? What This Week’s Moves Really Signal
Big Beautiful Bill triggers Musk/Trump feud
INSIGHT WEEKLY: June 8, 2025
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🌐 Markets Overview
📈 Markets This Week: Tech stocks push US markets higher
Major US indexes gained for the second week running. The best performing stocks were tech stocks, mainly due to improved sentiment on AI prospects and positive corporate earnings reports.
The most watched S&P 500 is now just 1.8% below its all time high, achieved in February this year. Will it set a new record in the next few weeks?
We have seen the markets oscillating with news on tariffs. The current upswing may get derailed at any time with bad news on tariffs. But it does look like agreements will be made, if only because they have to be made to prevent economies from being adversely affected by a reduction in global trade and by inflation. The pressures are increasing each week to prevent uncertainty from becoming a standard feature in the markets.
Germany’s DAX is just 0.7% below its all time high. Interestingly, and not covered much in the media, is its outstanding performance this year (+22%), and also its five year performance (+89%), which almost matches the S&P 500 (+88%).
Several factors explain the DAX 2025 performance: falling eurozone interest rates, strong earnings from industrial giants like Siemens and Mercedes-Benz, and investor rotation out of stretched U.S. tech stocks into more reasonably valued European equities. Germany’s export-heavy economy has also benefited from a weaker euro and resilience in global demand, particularly in luxury autos and industrial automation.
Over a five-year horizon, the DAX has delivered returns comparable to the S&P 500 (~89%), despite lower tech exposure. That’s partly due to global revenue streams, strong post-COVID recovery, and positioning in structural growth sectors like green energy and manufacturing. While the U.S. market has been dominated by a few tech names, Germany’s gains have been broader-based and tied to real-economy demand.
In the debt markets, Microsoft can borrow as cheaply as the US government or even cheaper, as it has a AAA rating, which the US government no longer has. Also, the US dollar is losing value.
Agreements on tariffs and a plan to manage the national debt are important confidence building measures.
Tech stocks this week
Meta led the pack with a 7.8% gain, building on investor interest around AI tools and ad tech innovations. Meta also signed a 20 year agreement to buy 1.1 gigawatts of nuclear energy from Constellation.
Nvidia (+4.9%) and Amazon (+4.2%) also rallied strongly, reflecting renewed interest in data center and AI infrastructure plays.
Tesla declined by 14.8% this week. The drop followed a public feud between CEO Elon Musk and President Trump. The conflict led to significant market volatility, although the stock rebounded slightly after reports of potential reconciliation.
Micron continues its strong performance due to demand for High Bandwidth Memory (HBM) driven by AI growth.
Other tech stocks gained on AI prospects
🇺🇸 The One Big Beautiful Bill and the Musk/Trump feud
The current spat between Elon Musk and President Trump originated on the effect of “The One Big Beautiful Bill Act” which, despite having some spending cuts, also included spending increases.
Musk has referred to the Bill as a “disgusting abomination”, as it will add to the national debt.
The table below is a summary of the bill, which will increase the budget deficit and add to the overall national debt by around $3 trillion in 10 years.
US debt is now at $36 trillion.
The pressures that increase the debt are:
Demographics: The proportion of older people is increasing, increasing social security and medical costs.
Healthcare: Costs are increasing every year.
Budget deficits: Government spending exceeded taxation revenue by $1.8 trillion in 2024, and this is expected to increase in future years.
Interest costs: Increasing debt servicing costs will increase as debt increases and also as parts of the debt get refinanced at higher interest rates.
What is the plan on the debt?
Debt is better seen in relation to GDP.
The assumption is that GDP growth will outpace debt. A few weeks ago, US Treasury Secretary Scott Bessent stated that it is better to "grow our way out of it" by having GDP run higher than nominal yields than to cut spending to reduce the deficit.
The chart below shows the historical US debt/GDP ratio, which has been steadily increasing, so it will take significant GDP growth to bring the ratio down to the mid-2000s levels.
Macro Watch: This Week’s Economic Developments
Here’s a quick roundup of this week’s key economic developments across major economies.
🌎 Global Overview & Market Reaction
OECD Growth Outlook Downgrade of its global GDP forecast to 2.9% for 2025-26 (from 3.1%), citing rising trade barriers and tariff threats as key drag factors. U.S. growth expectations dropped to 1.6% in 2025.
Fund Flows Shift to Europe for the third week running as U.S. Equity Funds post net outflows of $7.4 bn, while European Funds show inflows of $2.7 bn, spurred by optimism around ECB rate cuts. Tech and industrial sectors were the major beneficiaries.
🇺🇸 United States
May’s nonfarm payrolls rose by +139,000, which was stronger than expected, while unemployment held steady at 4.2%. The uptick boosted U.S. Treasury yields and lifted the dollar against major currencies.
If employment data continues to look good, the Federal Reserve is less likely to cut rates.
Manufacturing & Services contracts as the ISM manufacturing PMI registered 48.5 in May, marking three consecutive months in contraction territory, while the services PMI slipped just below 50 for the first time since June 2024. Notably, the manufacturing prices index remains elevated, pointing to ongoing pricing pressures as imports decline due to tariff effects.
Tariffs both threatened and implemented, continue to weigh on business sentiment. Recent U.S. - China trade talks offered limited breakthroughs ahead of the July 9 expiration of the current tariff pause.
🇪🇺 Europe
ECB Easing Pause Near as the ECB delivered its eighth consecutive 25 bp rate cut on June 5 to 2.00%, signaling a likely pause as inflation reached its 2% target.
Trade-Induced Inflation Risks as ECB officials flagged potential renewed inflation stemming from U.S. tariff threats and supply-chain disruptions, cautioning against policy divergence between Europe and the U.S..
Eurozone GDP expanded by +0.6% q/q in Q1 2025, double initial estimates, while headline inflation eased to 1.9% in May. Industrial output in Germany and France, however, declined more than anticipated.
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🌐 Artificial Intelligence and Tech
This cover has been designed using assets from Freepik.com
Anthropic gains engineers from OpenAI, according to a new report by SignalFire. Engineers are now eight times more likely to move to Anthropic than the reverse. The switch appears driven less by pay and more by company culture: respondents cited Anthropic’s clearer mission, stronger alignment on safety, and more promising equity upside.
Reddit has filed a copyright lawsuit alleging that Anthropic used Reddit posts without permission to train its Claude models. The platform recently began licensing its content, striking a $60M/year deal with Google. The case could prove significant for the industry’s long-standing approach to training data scraped from the open web with Reddit now pushing to turn data access into a paid model.
Elon Musk’s platform X (formerly Twitter) has updated its developer terms to block use of its data for AI training unless explicitly authorized. The change may serve dual purposes: protecting its in-house lab xAI from competitors, while also positioning X to charge licensing fees to outside AI developers.
Anthropic has announced a specialized version of Claude tailored for use in U.S. national security and defense contexts. The model is built for reliability and will likely be deployed by federal agencies and contractors.
DeepSeek has released a significant update to its R1 model, showing improved reasoning on logic and math tasks. But the upgrade also raised eyebrows: critics speculate the model may have trained on restricted datasets, including those from Gemini. DeepSeek has denied any misuse.
Get your free guide to AI
🌐 Crypto Corner
Top 10 cryptos:
Solana saw the steepest drop this week, falling 11.2% as investors took profits following a strong May rally. The selloff accelerated after failing to hold above the $150 mark, a key resistance level from earlier in the year.
Polkadot fell 10.4% this week - its steepest weekly drop in months. The decline reflects a mix of broader market weakness and bearish trading signals, such as breaking below key support levels on price charts.
Binance Coin was down 6.1%, reversing prior gains. It was affected by a broader pullback in altcoins and possible rotation into Bitcoin.
Ethereum dropped 5.9%, marking a sharp retreat after a recent surge. The coin appears to have hit resistance, with some analysts pointing to a bearish wedge pattern forming.
Cardano fell 4.8%, in line with other altcoins, as the market experienced widespread profit-taking after previous gains.
See the previous spotlight on Bitcoin halving
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Stay tuned for more insights and updates each week.