The Week Ahead - April 13th

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The Week Ahead Of Us 🔍

Welcome back!

We are quite exhausted going through the tariff news, as there’s been a lot of back and forth, but we’ve got the rundown for you in our Headlines section. Very briefly, Trump & his team walked back on announcements of a longer-term smartphone, computer, and electronics exemption from Friday & Saturday. However, futures are up as of right now, with S&P futures up 70bps and Nasdaq futures up 100bps. Given how many times the Trump administration has reversed course on tariffs, futures traders are betting on a reasonable resolution.

Things can dramatically change on a dime, as we’ve seen in the past two weeks, but it would be bullish for sentiment if the market starts believing that we’re not actually going to place the bulk of these tariffs. However, there are still 10% blanket tariffs for dozens of countries, 145% tariffs on China (less some 1-2 month exemptions) and plenty of confusion re: business and consumer sentiment. We’ll get into it more below.

Here’s a look at earnings this week.

• Monday: Goldman Sachs

• Tuesday: Johnson & Johnson, Bank of America, Citigroup, PNC, United Airlines, Albertsons

• Wednesday: Abbot Laboratories, Progressive, Prologis, U.S. Bancorp, Kinder Morgan, Travelers Companies

• Thursday: UnitedHealth Group, Netflix, American Express, Blackstone, Charles Schwab, Marsh McLennan, Interactive Brokers, Truist, State Street, Ally Financial

Here’s a look at economic data this week.

• Wednesday: U.S. Retail sales (1.2%), Industrial production (-0.2%)

• Thursday: Initial jobless claims, Housing starts (1.41MM), Building permits (1.46MM)

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Earnings Corner 📜 

Trending Up 📈 

JPMorgan Chase (JPM): JPMorgan reported earnings that beat estimates, carried by strong equity trading profits, but Jamie Dimon warned of turbulence in the economy. The bank saw revenue of $46.01B up 8% y/y (vs. $44.11B expected) and EPS of $5.07 (vs. $4.61 expected). Dimon noted that, “The economy is facing considerable turbulence (including geopolitics), with the potential positives of tax reform and deregulation and the potential negatives of tariffs and ‘trade wars,’ ongoing sticky inflation, high fiscal deficits and still rather high asset prices and volatility.” The stock was up 4%

Morgan Stanley (MS): Morgan Stanley beat earnings as equity trading income soared 45% due to global volatility. The firm reported revenue of $17.75B up 17% (vs. $16.58B expected) and EPS of $2.60 (vs. $2.20 expected). Equity trading revenue of $4.13B came in $840MM higher than expected; mgmt. saw particularly strong activity in Asia and operations catering to hedge funds. The stock was up 1.4%

BlackRock (BLK): The asset manager reported mixed results but hit a record AUM of $11.58T, due to $84B of net inflows in the quarter. BlackRock reported revenue of $5.28B (vs. $5.34B expected) and EPS of $11.30 (vs. $10.14 expected). Larry Fink expressed fears that the U.S. is “very close, if not in, a recession now” and projected a market slowdown until there is more certainty about the economy. The stock was up 2.33%

Trending Down 📉 

Wells Fargo (WFC): Wells Fargo fell after revenue missed estimates, due to lower-than-expected net interest income. The bank reported revenue of $20.15B down 3% y/y (vs. $20.75B expected) and EPS of $1.33 (vs. $1.24 expected). Net interest income was down 6% y/y, while other income rose 1%. The stock was down 0.95%

Today’s Headlines 🍿 

• Lutnick’s Latest - Sectoral tariffs are coming for semiconductors, electronics, and pharmaceuticals: There was communication on Saturday that semiconductor and electronic tariffs were getting waived, drawing some initial relief for Apple investors. But Howard Lutnick squashed that this morning, noting semiconductor, electronic component, and pharmaceutical tariffs are core to national security and need to be completed domestically. Lutnick noted they’re exempt from reciprocal tariffs, but are part of a blanket 20% tariff and will be included in sectoral tariffs in 1-2 months

  • Trump later made statements saying there was no tariff exception on Friday and that they are looking at semiconductors and the whole electronics supply chain in an upcoming national security investigation. He said “NOBODY is getting ‘off the hook’ for unfair Trade Balances…”

  • As of now, Trump has no plans to talk with Chinese President Xi Jinping

• China suspends certain rate earth minerals exports: In response to Trump’s tariff policy, China has suspended exports of certain rare earth minerals and magnets. These are key parts of automaker, aerospace manufacturer, military contractor, and semiconductor supply chains. China, which controls roughly 75% of rare earth production, is working on new regulations that could block these resources from getting into the hands of American companies

• The Fed’s ready to mobilize. Susan Collins, Boston Fed chair, said that the central bank would be “absolutely ready” to step in and stabilize global financial markets. Optimistically, she said there were no overall liquidity concerns and markets are "continuing to function well”

• Ray Dalio is worried about something worse than a Recession: The Billionaire founder of the hedge fund Bridgewater, told NBC News, “I’m worried about something worse than a recession if this isn’t handled well”, calling the tariff goals understandable but very disruptive

• Global investors are trading out of America. With bond yields rising and the dollar dropping, Minneapolis Fed President Neel Kashkari said that investors are increasingly departing from the view that the US is the safest place to park cash. The 30-year yield saw its biggest single week surge since 1982

• Europe and China are buddies now? After Trump blew up global markets, Xi Jinping began courting EU officials, trying to convince the bloc to form a united front against American “bullying.” Despite backlash against US trade policy, Xi faces an uphill battle — the EU has long argued that China’s overinvestment in manufacturing is flooding the world with cheap goods

• Inflation slows to six-month low. In March, core CPI (excluding food and energy) dropped from 2.8% to 2.4% annualized, stoking some optimism. However, economists warn that this number marks the “before” pre-tariff picture. One analyst noted, “we may be whistling past the graveyard”

• Consumer confidence drops to ‘08 lows. New data out of the University of Michigan showed that consumer sentiment across income brackets is weaker than it was during the Financial Crisis. Consumer sentiment fell to 50.8, down from 57.0 in March and below estimates of 54.6. Household income expectations are declining while inflation fears are surging

• No Toymakers to the King: Toymakers have been devastated by tariffs imposed on China, with the maker of Bratz dolls having 50%+ exposure there, and the rest of the products made in nations like Vietnam, Indonesia, and India. The toy industry has 80% exposure to China, with the giant toy maker Mattel having <40% exposure

• DOGE drops savings estimates by 85%. Elon is now targeting $150B of cost savings from his purge of the federal government, down from his initial $2T goal. However, the revised estimate may still be inflated by accounting errors and “guesswork”

• The DoD brings down the axe. The Pentagon announced a sweeping $5.1B cut in IT and consulting services. Calling out giants like Accenture and Deloitte, Secretary Pete Hegseth said, “We need this money to spend on better health care for our warfighters and their families, instead of $500 an hour business process consultant”

• Private Credit secondary sales look set to rise given the volatility: For example, Pemberton, an European private credit manager, was called up a Bank to buy debt at 95 cents on the dollar

  • Meanwhile, High Yield Spreads have widened out, with the market pretty much closed for new issue given the volatility

• HSBC is exploring a push in private credit…they’re probably far too late in terms of exploring this strategy, but the U.K. lender is evaluating making a push.

• CVC is exploring a deal to acquire Golub Capital: CVC has been looking for a deal for a while, previously debating merging with HPS. Now they have their eyes on Golub - one of the most well known direct lenders. Golub is a $75B lender with over 1,000 investment professionals, but reportedly they’re not interested in a deal

• WeightWatchers is filing for bankruptcy. With the soaring popularity of GLP-1’s like Ozempic and Wegovy, the weight management firm has struggled to stay relevant. In 2018 the company traded as high as $100/share. This week it dropped as low as $0.18

• Tropicana’s LME deal is seeking a April 15th deadline. Sponsors PAI Partners and Pepsi (yes, Pepsi), have gained 73%-78% support among 1L Lenders for a new first-out and second-out structure.

• The Beauty Salon Recession Indicator is flashing red: The indicator refers to when women opt for lower-maintenance colors and cuts to stretch out their trips to the hair salon. For example, dyed blonde hair requires a lot of maintenance, so a color melt instead could be a sign of salon spend savings

• Coachella attendees are reportedly using payment plans to finance attending the festival: 60% of Coachella’s 100k attendees are reportedly using buy now pay later plans to attend this past weekend’s festival

• Wealthy Buyers are backing out of multimillion-dollar home purchases: The WSJ reported on the stock market chaos starting to spook the high-end home market

M&A Transactions💭 

Xinchao Media, provider of community media platform, has reached a definitive agreement to be acquired for CNY 8.3B by Focus Media Technology (SHE: 002027). EV/Revenue was 4.09x.

Protect AI, developer of a cybersecurity platform, has reached a definitive agreement to be acquired for $700.0M by Palo Alto Networks (NAS: PANW).

Lyst, operator of an online fashion platform, has reached a definitive agreement to be acquired for $154.0M by ZOZO (TKS: 3092). Rothschild & Co advised on the sale.

Havfram, provider of subsea services, has reached a definitive agreement to be acquired for $979.4M by DEME (BRU: DEME).

Good Energy Group, a developer and supplier of electricity in the UK, was acquired for $128.54M by Esyasoft Technology. EV/EBITDA was 19.26x and EV/Revenue was 0.56x. Canaccord Genuity advised on the sale.

Woodruff-Sawyer & Co., provider of insurance brokerage and risk management services, was acquired for $1.2B by Arthur J. Gallagher & Company (NYS: AJG). EV/EBITDA was 13.64x and EV/Revenue was 4.48x.

SNP Schneider-Neureither & Partner, a software-oriented business consulting firm, was acquired for $500.0M by The Carlyle Group. EV/EBITDA was 11.72x and EV/Revenue was 1.81x. ParkView Partners advised on the sale.

Jack Wolfskin Retail, retailer of outdoor apparel a subsidiary of TopGolf Callaway Brands (NYS: MODG), was acquired for $290.0M by ANTA Sports Products. EV/EBITDA was 24.17x and EV/Revenue was 0.89x.

The Car Wash Business in the United States of Driven Brands was acquired for $385.0M by Magnolia Wash Holdings. William Blair & Company advised on the sale.

Private Placement Transactions💭 

SILQ, operator of digital platform, raised $110.0M of venture funding led by Sanabil Investments and Valar Ventures. Concurrently, the company was formed by the merger of ShopUp and Sary.

Nuro, developer of a fully autonomous, on road vehicle, raised $106.0M of Series E venture funding from Greylock, Tiger Global Management, and XN at a pre-money valuation of $5.89B.

Edward Jones, provider of investment advisory and management services, raised $133.69M of venture funding from undisclosed investors.

Base Power, provider of electricity services, raised $200.0M of Series B venture funding led by LightSpeed, Andreessen Horowitz, Valor Equity Partners, and Addition.

Axera, developer of an AI chip, raised over CNY 1.0B of Series C venture funding led by Inno-Chip, Liangjiang Industry Fund, and Oriza Holdings.

XY Miners, developer of cloud mining platform, raised $300.0M of venture funding led by Sequoia Capital.

Odds of the Day 🍒 

Kalshi traders are pricing in a 42% chance of Peter Navarro leaving the Trump administration this year.

*New Traders on Kalshi receive a $20 bonus of trading credit when depositing $100+ with the code “HYH”.

Noteworthy Chart 🧭

Meme Cleanser 😆 

Until next time!

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