This week's interesting finds

This week in charts

ETF trading volumes

UK heat pump applications

German heat pump applications

U.S. heat pump shipments

S&P 500 Staples Index

S&P 500 Index performance by first 100 days of presidency

Global investors intentions: cut U.S. equities

Historical S&P 500 Index drawdowns greater than 15%

S&P 500 Index earnings outlook sharpest decline since 2020

S&P 500 revenue from China vs. U.S. exports to China

U.S. pharmaceutical drug imports from China

Valuations by region

Foreign Funds Sour on US Corporate Bonds as Trump Sows Chaos

European and Asian money managers are showing signs of losing some of their appetite for lending to US companies as trade wars heat up, in a potentially worrying sign for corporate America.

The selling comes after overseas investors made record purchases of US corporate debt in 2024. Official data shows the demand slowing in February, according to Citigroup.

There are signs of foreign investors selling US assets broadly. Data showing flows into funds that take money from overseas and buy US stocks and bonds shows a sharp drop in purchases over the past two months, according to a note from George Saravelos, Deutsche Bank’s head of foreign exchange strategy, on Monday.

At least some foreign investors are guarded about jumping back into US credit after April’s roller-coaster ride.

In early April, Trump’s proposed tariffs hit security prices worldwide, including US corporate debt, Treasuries and stocks. Prices broadly recovered after the US president paused the proposed increases and talked about negotiating agreements with individual nations.

Around 30% of US corporate bonds are owned by foreign investors, according to economist Torsten Slok at Apollo Global Management Inc. If those buyers continue pulling back, and US money managers don’t step in to make up the difference, risk premiums on the debt will have to widen, said Hans Mikkelsen, a credit strategist at TD Securities.

Investor Caution

For asset allocators outside the US, the relative-value math involves comparing yields on domestic corporate notes with debt abroad, and then adding the cost of hedging their US investments back into their home currency.

In Japan, that calculus works out in favor of domestic corporate credit, according to JPMorgan strategists Eric Beinstein and Nathaniel Rosenbaum. Hedging costs may have come down, but Japanese government bond yields have risen significantly this year, touching highs not seen in more than a decade. The growing riskiness in US corporate bonds can make credit look comparatively less interesting.

In Europe, hedging costs have surged, recently touching their highest since March 2023. They are expected to edge even higher as the Federal Reserve and the European Central Bank continue on divergent interest-rate paths, the JPMorgan strategists said. Asset managers on the continent have been dialing back their exposure to US credit in part as a result.

To be sure, many investors have global mandates, which means they will continue to buy US corporate debt even if they pare back. Demand has also remained strong for newly issued bonds in the US, suggesting broad appetite for the asset class.

For now, foreign investors appear to be on the fence about the US corporate bond market, said Goldman Sachs’ Karoui, whose been meeting investors in Asia and Europe in recent weeks.

This week’s fun finds

It’s been over a decade since Bryan joined the Finance team at EdgePoint... and we haven’t been the same since. Happy 10^th work anniversary, Bryan!

To Win This Contest, Just Squawk Like a Seagull

A chorus of sea gull squawks and screeches could be heard in a seaside Belgian resort town on Sunday — but it was not coming from the birds.

Competitors from 13 countries came together in De Panne, Belgium, to see who could produce the most faithful imitation of a gull sound for the fifth annual European Gull Scream Championship.

This week's interesting finds

First quarter commentaries are now live!

This quarter, George Droulias talks about the importance of embracing uncertainty to get to Point B, while Frank Mullen discusses what to expect from credit investing at EdgePoint.

This week in charts

Free cash flow yield vs. return on investment capital

High income households investments and spending growth

Headline influence

S&P 500 Index sell side cuts

Chinese imports used in U.S. production

U.S. real GDP growth since 1801

U.S. dollar performance

Foreign investors selling U.S. stocks

U.S. private sector financial assets

Historical asset bubbles

U.S. vs. Global equities

California overtakes Japan to become the world’s fourth-largest economy

The Golden State’s nominal gross domestic product (GDP) reached US$4.1 trillion in 2024, according to preliminary data from the US Bureau of Economic Analysis, edging past Japan’s $4.02 trillion nominal GDP in the same period as recorded by the International Monetary Fund.

That means only the United States, China and Germany have larger economies than California, which outpaced all three countries with growth of 6% last year, according to the release.

“California isn’t just keeping pace with the world — we’re setting the pace,” Newsom said in a news release Wednesday. “Our economy is thriving because we invest in people, prioritize sustainability and believe in the power of innovation.”

But Newsom also warned that the state’s economic prowess is being threatened by “the reckless tariff policies of the current federal administration.”

California, America’s most populous state with some 40 million people, accounted for 14% of the nation’s GDP in 2024, according to government data, driven by Silicon Valley and its real estate and finance sectors.

Last week, Newsom sued Trump over his use of emergency powers to unilaterally enact sweeping global tariffs, which the governor said had hurt Californian families and businesses.

The lawsuit argues that Trump’s invocation of the International Economic Emergency Powers Act to enact tariffs was “unlawful and unprecedented,” and that such expansive action requires approval from Congress.

Through the IEEPA, Congress in 1977 granted the president broad authority to impose sanctions on countries, export controls, regulate financial transactions and freeze foreign assets under national emergency declaration, but it requires the Executive to consult and report to Congress when exercising these powers.

California engaged in nearly $675 billion of two-way trade in 2024, and counts Mexico, Canada and China as its top three trade partners, according to the state. Over 40% of Californian imports came from these countries, accounting for $203 billion of its more than $491 billion in total imports last year.

Twelve more states sued the Trump administration Wednesday for “illegally imposing” tax hikes on Americans through tariffs in a lawsuit the White House called a “witch hunt.”

This week’s fun finds

After the success of the joint intern moai a few weeks ago, Nikki wanted to run one solo on the last day of her internship. She decided to be a "jerk" about it and chose a tasty Jamaican-style meal. Thanks for the great food and all of your hard work!

'Kuchisabishii' Is The Japanese Word That Explains Why We're Eating Mindlessly

Do you find yourself wandering over to the fridge while in quarantine ― even when you’re not all that hungry? Have you been leaning into your favorite comfort foods a little more than usual lately? Sounds like you have “lonely mouth.”

For those unfamiliar, “kuchisabishii” is a uniquely Japanese word that literally means “lonely mouth” or “longing to have or put something in one’s mouth.”

This week's interesting finds

This week in charts

Weight comparison of Top 10 vs. Top 11 to 50 stocks in S&P 500 Index

Earnings per share revisions and valuations for Tech stocks

A wide range of expectations from sell-side analysts

Investor risk appetite

U.S. 10-year Treasury yields after shock events

Historical 20-year stock returns minus Investment grade bond returns

60/40 portfolio performance

U.S. term premium rising

Effects of tariffs on loan and bond markets

Top imports from China into U.S.

Number of Europeans travelling to the U.S.

Wealthy Buyers Are Backing Out of Multimillion-Dollar Home Deals

The luxury real estate has been largely unstoppable for the past few years, fueled by stock market gains and massive wealth appreciation since the pandemic. In places like New York, Palm Beach, Fla., Los Angeles and Aspen, Colo., wealthy buyers have plowed billions of dollars into the luxury home market with little regard for interest-rate hikes that have slowed the rest of the housing market.

Now, market gyrations and tariffs, both current and pending, are casting a shadow on high-end property as buyers pull out of deals or tap the brakes amid global economic uncertainty. In the U.S., the richest 10% have 36.3% of their total assets in stocks and mutual funds, according to a new report from Realtor.com, which found real-estate comprised 18.7% of their total assets. Until recently, luxury sales were on an upswing, and agents said high Wall Street bonuses indicated a strong year ahead.

Overall, the median sale price for U.S. luxury homes, defined as the top 5% of sales, rose 8.8% during the second quarter of 2024, more than twice as fast as nonluxury homes, according to the most recent data available from Redfin.

After markets lost $6.6 trillion in an epic two-day rout on April 3 and 4, fallout in the high-end real-estate market has been swift—even as many investors recouped losses during a market surge on April 9 following President Trump’s announcement of a 90-day pause on certain tariffs.

Kirman’s clients—international buyers who had been looking for six months—went into escrow on a house on roughly 1 acre two weeks ago and backed out of the deal on April 3, he said. They were within a contingency period and got their money back. “They got spooked,” he said. He said some buyers are swooping in to buy real estate as a hedge against the stock market, but others are pausing amid uncertainty. “When news cycles get too negative, it just really makes people second-guess their decisions,” he said.

Similar uncertainty is trickling throughout high-end enclaves around the country that have seen prices skyrocket amid high demand and limited inventory. “There’s a misconception that Aspen is insulated from a national or global economy,” said real-estate Steven Shane of Compass, who has brokered several megadeals in the affluent ski town since Covid. He said he saw $100 million worth of real-estate return to the market since April 2—including one of his listings, a roughly 7,900-square-foot house in Aspen’s West End that is asking $52.5 million. Listed in December, it was marked pending on Feb. 24, according to Zillow. It was relisted April 8. Shane declined to comment on why the deal fell through. “It’s a volatile market and people generally like certainty,” he said.

This week’s fun finds

6 Inspiring Talks From TED2025: The World’s Largest Ocean Cleanup, a Chocolate Connoisseur, and More

TED2025. The event, which took place April 7-11 in Vancouver, Canada, featured dozens of thought-provoking TED Talks, spotlighting innovative scientists, storytellers, global leaders, and more — all centered on this year’s theme, “Humanity Reimagined.”

The throughline for the week was “AI is gaining power at an astonishing pace, prompting a question that’s both alarming and illuminating: What are humans for?” To find the answer, the conference brought “those who can show what human flourishing might look like in the years ahead” onto the stage, and their perspectives were nothing short of eye-opening.

Why Pink Waves Were Suddenly Crashing Off the Coast of San Diego: Photos

Seawater often varies in hue — from crystal clear to chlorophyll-tinted green, and sometimes even neon blue thanks to bioluminescent plankton. But for three brief periods in early 2023, one small part of the Pacific Ocean sported a more novel shade: Waves were crashing against the shore looking pretty in pink.

Though some bodies of water appear pink naturally, thought to be due to the presence of certain types of algae or bacteria, the fuchsia color tinting the water off the coast of San Diego was intentionally caused by scientists who are hoping to learn more about the way the world’s oceans work.

This week's interesting finds

This week in charts

Performance after 20% declines

Stocks and 10-year yield movement

Historical U.S. Treasury ownership

Total foreign holdings

U.S. equity fund flows

Record high valuation relative to GDP

Historical U.S. bear markets and recoveries

Correlation between markets

Historical bear market rallies

Duration and performance of bear market rallies

Private credit secondary sales set to rise as market turmoil spurs hunt for cash

Investors are preparing to step up sales of their private credit holdings, as heightened market volatility unleashed by U.S. President Donald Trump's trade wars forces them to find new ways to raise cash, fund managers and executives say.

While so-called "secondary sales" of stakes in private equity funds have soared amid a downturn in dealmaking, assets in private credit seldom change hands. This week's dramatic market tumble may change that.

Investors are enquiring about shedding their private credit investments in the secondary market because they worry about being overly exposed to private assets as public markets fall in value and as the need for accessing cash in more volatile markets grows, executives say.

Negotiating a sale in the secondary market takes time, typically weeks, and is not the first place institutional investors turn to raise cash.

The scale and speed of market selloffs this week have seen some hedge funds rush to offload private debt positions, however, with several forced to unwind highly leveraged debt purchases after lenders hit them with margin calls.

Secondary market deal volumes hit a record $160 billion last year, driven by asset sales by leveraged buyout funds that could not exit investments through M&A and initial public offerings in volatile markets, and by their investors such as pension funds and insurers needing cash back faster than they could deliver.

Private equity transactions account for a much larger share of transactions. Ares has said an estimated 2-3% of private equity assets are traded in the secondary market, against less than 1% in private credit. 

DENOMINATOR EFFECT

One big driver for investors to sell is the "denominator effect", which leaves them with too much private market exposure when public stock and bond markets tank.

That's because private assets are often marked to market, or revalued, monthly or quarterly, shielding investors from the volatility seen in public markets but leaving them overly exposed.

Fund managers caution that there has been little sign of distressed selling yet, with discounts being discussed in the range of 5-10% below par.

This week’s fun finds

Interns Vishnu, Nikki and Khushi organized a Hakka moai on Friday. We can’t thank them enough for such a wonderful lunch and all the hard work they've done throughout the term. 

‘Robobear’ Is Training People to Fight Off an Actual Bear

To educate the public on how to handle an encounter with an aggressive predator, the Wyoming Game and Fish Department created a low-tech robotic bear that can help teach people how to respond quickly to a charging bear.

It is springtime, after all. The bears are waking up from their slumber, and they are starving. There’s no telling what they’ll do if they spot you, so it’s best to be armed, not just with some form of bear repellent but with the knowledge of how to use it on a bear that has you in its sights.

This week's interesting finds

This week in charts

Military spending

Mines

Cross-border fund flows

Buyback announcements

Gold fund flows

Tech bear market

S&P 500 Index daily changes

Europe & Emerging Markets equity fund flows

Reciprocal tariffs

Top trading partners with the U.S.

Exports to U.S. vs share of manufacturing output

CEO confidence declining

Economic Policy Uncertainty Index vs. US IG Corporate bond spread

The Rest of the World Is Bracing for a Flood of Cheap Chinese Goods

U.S. consumers and businesses learned Wednesday that, from April 9, Chinese imports will face tariffs of around 70% on average, after Trump walloped China with stiff new duties as part of his “Liberation Day” trade broadside. The new tariffs will likely push up prices in the U.S. for products ranging from consumer electronics and toys to machinery and essential components for manufacturing. 

That towering tariff wall also risks diverting some U.S.-bound Chinese exports into a global market already swimming in China-made goods, worsening a so-called China shock that is facing pushback from countries around the world, according to economists. Other major exporters, such as Vietnam, South Korea and Japan, could also see barriers to their exports proliferate as U.S. spending on imports falls and their exports get shunted to new destinations. 

Economists note that such domino effects underscore how trade wars can quickly escalate, drawing in more countries as retaliatory measures fly and defensive barriers go up. 

President Trump on Wednesday announced plans to levy tariffs on a range of U.S. trading partners that he accuses of taking advantage of the U.S. by boosting exports while keeping their own barriers to imports high. 

China, regarded by many in Trump’s orbit as the U.S.’s chief geopolitical foe, was hit especially hard. Chinese imports will be slapped with a 34% duty. That new tariff rate was stacked on top of a 10% tariff levied in February, another 10% added in March and a range of other tariffs imposed during Joe Biden’s presidency and Trump’s first term in office. That lifts the average rate on Chinese imports to around 70%, according to economists. 

It will be hard for other countries to absorb Chinese exports that normally went to the huge U.S. market. The U.S. in 2024 imported around $440 billion of goods from China, according to Census Bureau data. China in 2023 was the source of a fifth of iron and steel products imported into the U.S., more than a quarter of its imported electronics, a third of its imported footwear and three-quarters of its imported toys, according to data from the International Trade Centre, an agency of the United Nations and the World Trade Organization. Ninety-one percent of U.S. umbrella imports came from China. 

U.S. imports from China are unlikely to drop to zero overnight. Consumers might be able to find alternatives to some Chinese-made products, but not others, and manufacturers outsource big chunks of their production to Chinese factories. Even if they manufacture goods at home, they are often bringing in parts and basic materials from China that can be hard to find elsewhere.

Lower U.S. spending on Chinese imports means unsold goods have to go somewhere else. Yet surging Chinese exports are already jacking up tensions between China and the world’s big economies, and could rise further if exporters try to unload what had been U.S.-bound shipments to other countries. 

Since Trump launched his trade war in 2018, China has been the subject of almost 500 antidumping rulings and investigations, according to Global Trade Alert, a Switzerland-based nonprofit that tracks global trade policy. 

Chinese leader Xi Jinping has poured investment into manufacturing to support advanced technology and pump up growth amid an epic property crunch and tepid consumer spending. The result has been a surge in exports, as companies hunt for overseas buyers to soak up goods they can’t sell at home. China last year posted a trade surplus of $1 trillion. Countries have moved to shield domestic industries from cut-price Chinese competition in response. 

Beijing has announced plans to borrow and spend more to shore up growth and pep up consumer spending. But given the unexpected scale of Trump’s tariff blitz, economists say it will probably need to do more, such as cut interest rates, lift government borrowing further and find ways to rekindle beaten-down consumer confidence, perhaps by drawing a line under its drawn-out real estate bust. 

Yu Xiangrong, chief China economist at Citi, said that without more stimulus, the additional tariffs will shave between 0.5 and 1 percentage point off Chinese growth this year.

Beijing said on Thursday that it would deploy “resolute” countermeasures against the latest tariffs on Chinese goods, though it didn’t immediately say what those were. In response to Trump’s earlier tariffs, China retaliated with tariffs of 15% on imports of U.S. chicken, wheat, corn and cotton and 10% duties on soybeans and beef. It also added a string of U.S. companies to export control and corporate blacklists. 

This week’s fun find

The Strange Power of Laughter

There’s nothing like getting caught in a giggle loop, where the desire to laugh builds until it bursts out at a disastrous moment. Only then do we often realize that laughter is a rather strange phenomenon. Although we usually think of laughter as a response to something funny, sometimes laughter is no laughing matter!