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May 23, 2025
  
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Today

Markets are looking to end a turbulent week lower, with stock futures falling this morning after yet more tariff threats. Trump threatened to impose a 25% tariff on Apple if it does not manufacture iPhones in the U.S., challenging Apple’s current model of manufacturing most of its iPhones in China. He didn’t stop there though, threatening 50% tariffs against the European Union after he noted that there has been no progress on current negotiations. In other news, this week was dominated by a bond market sell-off, driven by two key factors: a disappointing 20-year Treasury auction and mounting concerns over the U.S. fiscal outlook. On the fiscal front, Trump’s recently passed tax-and-spending package is expected to increase deficits by $2.7 trillion over the next decade. Coupled with investor anxiety following Moody’s downgrade of the U.S. credit rating, which stripped America of its AAA status, bond markets have had plenty to absorb. Elevated yields and ongoing fiscal uncertainty may continue to weigh on sentiment as investors brace for potential volatility ahead. 

G-7 leaders must be thrilled. Trump will attend the G-7 summit in Alberta from June 15–17, amid strained relations with key allies over trade policies and the ongoing war in Ukraine. Trump’s protectionist tariffs and lukewarm support for Ukraine have raised concerns among European leaders, who are frustrated by his failure to pressure Russia into a ceasefire. While consensus may be found on addressing China’s trade practices, divisions remain over many other areas. The summit, hosted by Mark Carney, comes as Trump continues to challenge traditional diplomatic norms. 

Speaking of G7 leaders, the G7 finance ministers and central bank governors wrapped up their summit in Banff with a focus on unity amid a complex global backdrop. While the official communiqué highlighted collaboration on issues like financial crime and support for Ukraine, it notably left out any mention of U.S. tariffs. That omission may have been intentional to avoid airing internal tensions (and upsetting you know who), especially with trade-sensitive topics still evolving ahead of national elections. Still, Canadian Finance Minister François-Philippe Champagne confirmed that tariff concerns were raised behind closed doors and stressed the importance of open dialogue among allies. 

While there are reasons to be bearish on the U.S. dollar, such as rising debt, policy uncertainty, and the Trump administration’s trade agenda, some strategists believe the recent wave of selling may be excessive. The dollar has dropped 5% since early April and 10% since January, driven by concerns over trade wars, attacks on the Fed, and fiscal instability. Investor sentiment and positioning have become extremely negative, with hedge funds holding one of the largest short positions in years and dollar exposure at its lowest since 2006. Despite weak fundamentals, the recent downturn may be overdone, especially given the limited Fed rate cuts now priced in and potential for a near-term correction as sentiment cools. 

Prices for new pharmaceuticals in the U.S. more than doubled last year compared to 2021, with a median annual list price exceeding $370,000, driven largely by an increase in high-cost therapies for rare, or “orphan,” diseases. These drugs, which now make up 72% of new launches, often target small patient populations and benefit from incentives like extended market exclusivity. Gene and cell therapies, including some priced over $1 million annually or one-time treatments exceeding $4 million, contributed to the surge. Despite government efforts to curb drug costs, experts say high prices are unlikely to abate without lowering development expenses. While drugmakers argue that these therapies reduce overall healthcare costs, critics note the burden on healthcare systems and patients remains significant, even after insurance rebates and patient assistance programs. 

Where do people stand sit on this? If you ever felt guilty after reclining your seat on a flight, you are not alone. A recent study suggests 68% of flyers avoid reclining their seat out of courtesy, despite airplane cabins becoming increasingly claustrophobic. Since the 1980s, seat width has shrunk from 20 inches to just 17–18 inches, and legroom has tightened from 34–36 inches to a cramped 28–31. Airlines have squeezed in more passengers (and perhaps a few more mid-air arguments), turning comfort into a scarce commodity and fuelling an ongoing etiquette debate about seat reclining. While you may feel bad about reclining, there is apparently an etiquette to the process. Etiquette coaches suggest looking back before reclining to ensure you’re not encroaching on someone’s limited space, especially taller passengers, and if possible, give a polite heads-up to the person behind you. We’re sure these two thoughtful gestures will make those being reclined on feel much better as their already limited space all but disappears. 


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Company news

President Trump threatened Apple Inc. with a tariff of at least 25% if it does not manufacture its iPhones in the US, ramping up pressure on the tech giant to secure more domestic production.  Apple did not immediately respond to a request for comment on Trump’s threat. Apple has become a frequent Trump target in his push to force companies to bring more manufacturing jobs to the US. Trump’s demands pose a stark challenge to the company, whose supply chains for its popular phones have been concentrated in China for years.  Building iPhones from scratch in the U.S. would be extremely difficult even for a cash-rich company like Apple, with a lack of domestic engineering and manufacturing talent making that nearly impossible in the short run. Currently, Apple manufactures most of its iPhones in China and has no smartphone production in the U.S. The company has promised to hire more workers in the U.S. and pledged to spend $500 billion domestically over the next four years. 


Commodities

Oil extended this week’s decline as OPEC+ weighs another production increase that could add supplies into a market already expected to face a glut. Crude benchmarks are down for a fourth straight session and bringing its weekly losses to about 2%. OPEC and its allies discussed another major output-quota increase of 411,000 bpd for July, although no agreement has yet been made. Crude has shed about 14% this year, hitting the lowest since 2021 last month, as OPEC+ loosened supply curbs at a faster-than-expected pace, just as the U.S.-led tariff war posed headwinds for demand. Prices had recovered some ground with the easing of trade tensions, but data this week showed another rise in U.S. commercial oil stockpiles, also adding to concerns about a surplus. 

Platinum rose to the highest in two years and is on track for a weekly gain of over 10%, the biggest such advance in more than four years. The precious metal rallied through the week as the industry gathered in London for an annual event to discuss the market outlook, and as the World Platinum Investment Council estimated a shortage of almost 1 million ounces this year. The potential for platinum to serve as a substitute in jewelry for more-expensive gold has lifted sentiment, as has the challenging outlook for supply and dwindling above-ground stocks. Gold itself headed for a weekly gain as investor concern about the US fiscal deficit boosted the metal’s appeal. 



Fixed income and economics

Investors are demanding higher returns on long-term government bonds amid growing concerns over fiscal sustainability, inflation, and political uncertainty, particularly in the U.S., Japan, and the UK. Recent weak auctions in the U.S. and Japan underscore rising skepticism about government borrowing, worsened by Moody’s downgrade of U.S. credit and fears surrounding Trump’s tax cuts and trade policies. The sharp rise in long-end yields reflects a repricing of the term premium (the extra return investors require for holding long-term debt) now seen as too low given soaring debt levels and waning central bank support. Foreign demand for U.S. bonds is falling, while Japan faces similar pressures with the BOJ retreating from bond markets. In contrast, Germany, with a debt-to-GDP ratio below 100%, may benefit from its relatively sound fiscal outlook as investors seek safer alternatives. The US 10-year term premium, or the extra return investors demand to own longer-term debt instead of a series of shorter ones, has climbed to near 1%, a level last seen in 2014. It’s a measure of how shaky investors are about plans to raise the scale of future borrowing. The US’s funding challenges came into focus after Moody’s Ratings stripped the nation of its last top-tier credit score a week ago. That downgrade was followed by the US House of Representatives passing a multi-trillion dollar bill that extends President Donald Trump’s tax cuts, and weak demand for an auction of 20-year Treasuries. 


Chart of the day

 

Markets


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Action indeed is the sole medium of expression for ethics

Jane Addams

Contributors: A. Innis, A. Nguyen, P. Kwon

Charts are sourced to Bloomberg unless otherwise noted.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson Wealth Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. Richardson Wealth Limited, Member Canadian Investor Protection Fund. Richardson Wealth is a trademark of James Richardson & Sons, Limited used under license.

 

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