Good evening investors!
In my last newsletter, I mentioned that "volatility" is the main investment theme for 2025.
Little did I know that over the next week we would get crypto-backed mortgages, more trade war escalation, and higher than expected inflation.
And true to form, the stock market decided to hit all-time highs.
What's so interesting is that there is little disagreement within investing circles that stocks are currently overvalued. But there is also little disagreement about what a great investment stocks are.
Personally, I remain very skeptical about equities, and remain in a pretty conservative mix of stocks, real estate, gold, bonds, and cash.
To be clear, this is not a normal portfolio for me. I typically like to have most of my assets in stocks with long-term growth potential. But in a volatile environment like this one, I prefer consistent growth over volatile growth.
Anyways, let's dive into some pretty interesting developments I think you should be aware of!
-Brian
In Today's Issue:
π₯ Never Bet Against Stocks
π₯ Buy a House With Cryptocurrency
π₯ Friendship With Canada: Terminated
Markets
Can't Stop Won't Stop
Last week, the S&P 500 rocketed 2.90% to new all-time highs, while the tech-heavy Nasdaq nearly doubled that gain at a whopping 4.25%. Close behind the pack was the Dow Jones Industrial Average at a respectable 2.80%. Driving the gains were two key developments: the ceasefire between Israel and Iran, and prospective interest rate cuts later this year.
In what felt like a fever dream for many, President Trump was able to negotiate and hold a ceasefire between two warring countries after directly bombing key nuclear sites in Iran. While the initial strikes sparked volatility and concerns about U.S. involvement and potential escalation at a global scale, the ceasefire was welcome news for investors. This sent oil prices lower and stocks higher.
Around the same time, Federal Reserve Chair Jerome Powell answered questions before congress about the state of the U.S. economy as well as monetary policy. During the meeting, Chair Powell stood his ground on current policy which has left rates unchanged, much to the chagrin of President Trump and many other investors who would like to see lower rates. However, the Fed boss made it clear that the committee is looking to lower rates as soon as later this year, and that they are just waiting to make sure that consumer prices are not being impacted by tariffs and other geopolitical risks.
Housing
"Crypto Mortgages" Explained
Picture this:
You are a millenial drowning in student loan debt, out of control costs of living, and home prices that are out of reach. One day, your buddy Brian turns you onto this hot memecoin called Fartcoin, and you decide to buy $1,000 of it. After 2 years, you see Fartcoin making headlines for going from $1 per coin to $100 per coin. You double check your balance and see that you have $100,000 in Fartcoin!
You look at your spouse and shout, "WE DID IT! WE CAN FINALLY AFFORD A HOME!" You find your dream home on Zillow, apply for a government-backed mortgage, and qualify thanks to your well-earned nest egg of Fartcoin. After over 30 years of hard work, you can finally put down your roots to start a family and live the American Dream. For the first time in over a decade, you sleep soundly through the night.
This may sound like an AI-generated fantasy, but it very well may be the future. This week, the head of the Federal Housing Finance Authority issued an order directing government-sponsored enterprises Fannie Mae and Freddie Mac to consider cryptocurrency holdings as legitimate reserve assets for mortgages. While this is relatively breaking news, it seems to be a clear step towards the dream of a growing number of Americans: decentralized gambling.
Trade
Trump to Canada, "You're Fired"
On Friday of last week, President Trump dropped yet another bomb (not a literal one this time) on social media. In a post on Truth Social, the former TV star announced that the U.S. is terminating all trade negotiations with Canada based on a Digital Services Tax that will be placed on companies doing business in Canada. After doing some digging on this, here is what you need to know:
The Digital Services Tax Act was approved on June 20th, 2024, and is set to go into effect this Monday, June 30th. Under this legislation, any company (not just U.S.-based) that makes more than $20M CAD (~$14.6 USD) in digital services revenue from Canadian users will be subject to an extra 3% on revenue above that threshold. So as an example, if a tech company has a strong Canadian user base that pays them $20,000,001 CAD during the year, that company will owe an extra $0.03 CAD.
According to President Trump, this is a "direct and blatant attack on our country." In response to this legislation that was voted on a year ago and already included as part of a trade deal slated for July, the President has terminated all trade talks with Canada and stated that the U.S. will unilaterally decide what Canada's tariff will be in the next week or so.
My favorite part in all this is that following the news, markets sold off close to 1% only to immediately recover the majority of those losses to close the week at all time highs.
As I mentioned in last week's newsletter, "volatility"is not just the biggest investing theme of 2025, it's the only one.
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