Category: Chaos

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Are we looking at an AI house of cards? Bubble worries emerge after Oracle blowout figures

AI Bubble?

There’s growing concern that parts of the AI boom—especially the infrastructure and monetisation frenzy—might be built on shaky foundations.

The term ‘AI house of cards’ is being used to describe deals like Oracle’s multiyear agreement with OpenAI, which has committed to buying $300 billion in computing power over five years starting in 2027.

That’s on top of OpenAI’s existing $100 billion in commitments, despite having only about $12 billion in annual recurring revenue. Analysts are questioning whether the math adds up, and whether Oracle’s backlog—up 359% year-over-year—is too dependent on a single customer.

Oracle’s stock surged 36%, then dropped 5% Friday as investors took profits and reassessed the risks.

Some analysts remain neutral, citing murky contract details and the possibility that OpenAI’s nonprofit status could limit its ability to absorb the $40 billion it raised earlier this year.

The broader picture? AI infrastructure spending is ballooning into the trillions, echoing the dot-com era’s early adoption frenzy. If demand doesn’t materialise fast enough, we could see a correction.

But others argue this is just the messy middle of a long-term transformation—where data centres become the new utilities

The AI infrastructure boom—especially the Oracle–OpenAI deal—is raising eyebrows because the financial and operational foundations look more speculative than solid.

Here’s why some analysts are calling it a potential house of cards

⚠️ 1. Mismatch Between Revenue and Commitments

  • OpenAI’s annual revenue is reportedly around $10–12 billion, but it’s committed to $300 billion in cloud spending with Oracle over five years.
  • That’s $60 billion per year, meaning OpenAI would need to grow revenue 5–6x just to break even on compute costs.
  • CEO Sam Altman projects $44 billion in losses before profitability in 2029.

🔌 2. Massive Energy Demands

  • The infrastructure needed to fulfill this contract requires electricity equivalent to two Hoover Dams.
  • That’s not just expensive—it’s logistically daunting. Data centres are planned across five U.S. states, but power sourcing and environmental impact remain unclear.
AI House of Cards Infographic

💸 3. Oracle’s Risk Exposure

  • Oracle’s debt-to-equity ratio is already 10x higher than Microsoft’s, and it may need to borrow more to meet OpenAI’s demands.
  • The deal accounts for most of Oracle’s $317 billion backlog, tying its future growth to a single customer.

🔄 4. Shifting Alliances and Uncertain Lock-In

  • OpenAI recently ended its exclusive cloud deal with Microsoft, freeing it to sign with Oracle—but also introducing risk if future models are restricted by AGI clauses.
  • Microsoft is now integrating Anthropic’s Claude into Office 365, signalling a diversification away from OpenAI.

🧮 5. Speculative Scaling Assumptions

  • The entire bet hinges on continued global adoption of OpenAI’s tech and exponential demand for inference at scale.
  • If adoption plateaus or competitors leapfrog, the infrastructure could become overbuilt—echoing the dot-com frenzy of the early 2000s.

Is this a moment for the AI frenzy to take a breather?

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China-U.S. trade slump deepens as exports plunge 33%

U.S. imports from China fall in August 2025

China’s exports to the United States fell sharply in August 2025, marking a six-month low and underscoring the growing strain in global trade dynamics.

According to recent data, shipments from China to the U.S. dropped by 33% year-on-year, reflecting both weakening demand and the ongoing effects of geopolitical tensions.

This decline is part of a broader slowdown in China’s export sector, which saw overall outbound shipments contract for the sixth consecutive month.

Analysts point to several contributing factors: tighter monetary policy in the U.S., shifting supply chains, and a cooling appetite for Chinese goods amid rising tariffs and trade barriers.

Down 33%

The 33% plunge is particularly striking given the scale of bilateral trade. The U.S. remains one of China’s largest export markets, and such a steep drop signals deeper economic recalibrations.

Sectors hit hardest include electronics, machinery, and consumer goods—industries that once formed the backbone of China’s export dominance.

Economists warn that this trend could have ripple effects across global markets. For China, it raises questions about domestic resilience and the need to pivot toward internal consumption.

For the U.S., it may accelerate efforts to diversify supply chains and invest in domestic manufacturing.

The timing is also politically charged. With President Trump’s tariff policies still in effect and China navigating its own economic headwinds, trade relations remain tense.

This downturn may prompt renewed negotiations—or further decoupling.

Despite the ongoing slump in trade, the U.S. continues to be China’s largest export destination among individual countries.

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The staying power of gold!

Gold

Gold’s recent surge—hitting over $3,550 per ounce (4th September 2025)—isn’t just a speculative blip.

It’s a convergence of deep structural shifts and short-term catalysts that are reshaping how investors, central banks, and governments think about value and stability.

Here’s why

🧭 Strategic Drivers (Long-Term Forces)

Central Bank Buying: Nearly half of surveyed central banks reportedly plan to increase gold reserves through 2025, citing inflation hedging, crisis resilience, and reduced reliance on the U.S. dollar.

Dollar Diversification: After Western sanctions froze Russia’s reserves in 2022, many countries began reassessing their exposure to dollar-denominated assets.

Fiscal Expansion & Debt Concerns: With U.S. debt surpassing $37 trillion and new legislation adding trillions more, gold is seen as a hedge against long-term dollar instability.

⚡ Tactical Catalysts (Short-Term Triggers)

Geopolitical Tensions: Ongoing wars, trade disputes, and questions around Federal Reserve independence have heightened uncertainty, boosting gold’s ‘fear hedge’ appeal.

Interest Rate Expectations: The Fed has held rates steady, but markets anticipate cuts. Lower yields make non-interest-bearing assets like gold more attractive.

Weakening U.S. Dollar: The dollar’s decline against the euro and yen has made gold cheaper for foreign buyers, increasing global demand.

ETF Inflows & Retail Demand: Physically backed gold ETFs saw their largest first-half inflows since 2020, while bar demand rose 10% in 2024.

Gold futures price one-year chart (December 2025 Gold)

🧮 Symbolic Undercurrent

Gold isn’t just a commodity—it’s a referendum on trust. When institutions wobble and currencies lose their shine, gold becomes the narrative anchor: a timeless, tangible vote of no confidence in the system.

Summary

🛡️ Safe Haven: Retains value during crisis.

📈 Inflation Hedge: Preserves purchasing power.

🧩 Portfolio Diversifier: Low correlation with other assets.

✋ Tangible Asset: Physical, unlike stocks or bonds.

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The Nixon shock: When politics undermined the Fed—and markets paid the price

Nixon Fed Interference shock

In the early 1970s, President Richard Nixon’s pursuit of re-election collided with the Federal Reserve’s independence, triggering a cascade of economic consequences that reshaped global finance.

The episode remains a cautionary tale about the dangers of politicising monetary policy.

At the heart of the drama was Nixon’s pressure on Fed Chair at the time, Arthur Burns to stimulate the economy ahead of the 1972 election. Oval Office tapes later revealed Nixon’s direct appeals for rate cuts and looser credit conditions—despite rising inflation.

Burns, reluctant but ultimately compliant, oversaw a period of aggressive monetary expansion. Interest rates were held artificially low, and the money supply surged.

Dow historical chart – lowest 43 points to around 45,400

The short-term result was a booming economy and a landslide victory for Nixon. But the longer-term consequences were severe. Inflation, already simmering, began to boil. By 1973, consumer prices were rising at an annual rate of over 6%, and the dollar was under siege in global markets.

Then came the real shock: in August 1971, Nixon unilaterally suspended the dollar’s convertibility into gold, effectively ending the Bretton Woods system.

This move—intended to halt speculative attacks and preserve U.S. gold reserves—unleashed a new era of floating exchange rates and fiat currency. The dollar depreciated sharply, and global markets entered a period of volatility.

By 1974, the consequences were fully visible. The Dow Jones Industrial Average had fallen nearly 45% from its 1973 peak.

Politics vs the Federal Reserve – lesson learned?

Bond yields soared as investors demanded compensation for inflation risk. The U.S. economy entered a deep recession, compounded by the oil embargo and geopolitical tensions.

The Nixon-Burns episode is now widely viewed as a breach of central bank independence. It demonstrated how short-term political gains can lead to long-term economic instability.

The Fed’s credibility was damaged, and it took nearly a decade—culminating in Paul Volcker’s brutal rate hikes of the early 1980s—to restore price stability.

Today, as debates over Fed autonomy resurface, the lessons of the 1970s remain urgent. Markets thrive on trust, transparency, and institutional integrity. When those are compromised, even the most powerful economies can falter.

THE NIXON SHOCK — Early 1970’s Timeline

🔶 August 1971 Event: Gold convertibility suspended Market Impact: Dollar begins to weaken Context: Nixon ends Bretton Woods, launching the fiat currency era

🔴 November 1972 Event: Nixon re-elected Market Impact: Stocks rally briefly (+6%) Context: Fed policy remains loose under political pressure

🔵 January 1973 Event: Dow peaks Market Impact: Start of sharp decline Context: Inflation accelerates, investor confidence erodes

🟢 1974 Event: Watergate fallout, Nixon resigns Market Impact: Dow down 44% from 1973 high Context: Recession deepens, Fed credibility damaged.

Current dollar dive, stocks boom and bust (the Dow fell 19% in a year and then by 44% in 1975 from its January 1973 peak). U.S. 10-year Treasury yields surged (peaking at nearly 7.60% -close to twice today’s yield).

In hindsight, Nixon won the election—but lost the economy. And the Fed, caught in the crossfire, paid the price in credibility. It’s a reminder that monetary policy is no place for political theatre.

Is history repeating itself? Is Trump’s involvement different, or another catastrophe waiting to happen?

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Is Wall Street more fixated on Nvidia’s success than the potential failure of the Fed – the Fed needs to maintain independence?

Nvidia, Wall Street and the Fed

As Nvidia prepares to unveil another round of blockbuster earnings, Wall Street’s gaze remains firmly fixed on the AI darling’s ascent.

The company has become a proxy for the entire tech sector’s hopes, its valuation ballooning on the back of generative AI hype and data centre demand. Traders, analysts, and even pension funds are treating Nvidia’s quarterly results as a bellwether for market sentiment.

But while the Street pops champagne over GPU margins, a quieter and arguably more consequential drama is unfolding in Washington: The Federal Reserve’s independence is under threat.

Recent political manoeuvres—including calls to fire Fed Governor Lisa Cook and reshape the Board’s composition—have raised alarm bells among economists and institutional investors.

The Fed’s ability to set interest rates free from partisan pressure is a cornerstone of global financial stability. Undermining that autonomy could rattle bond markets, distort inflation expectations, and erode trust in the dollar itself.

Yet, the disparity in attention is striking. Nvidia’s earnings dominate headlines, while the Fed’s institutional integrity is relegated to op-eds and academic panels.

Why? In part, it’s the immediacy of Nvidia’s impact—its share price moves billions in minutes.

The Fed’s erosion, by contrast, is a slow burn, harder to quantify and easier to ignore until it’s too late.

Wall Street may be betting that the Fed will weather the political storm. But if central bank independence falters, even Nvidia’s stellar performance won’t shield markets from the fallout.

The real risk isn’t missing an earnings beat—it’s losing the referee in the game of monetary policy.

In the end, Nvidia may be the star of the show, but the Fed is the stage. And if the stage collapses, the spotlight won’t save anyone.

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News agent makes the news – WH Smith’s fresh start derails in a fog of accounting mistakes

W H Smith error

WH Smith’s attempt to reinvent itself as a sleek, travel-focused retailer has hit turbulence, with a £30 million profit overstatement in its North American division sending shares into a 42% nosedive.

The error, stemming from premature recognition of supplier income, has triggered a full audit review and left investors ‘sobbing into their cornflakes’, as one analyst reportedly put it. Not nice!

The timing couldn’t be worse. Having sold off its UK High Street arm earlier this year, WH Smith was banking on its overseas operations to deliver growth.

Instead, the company now expects just £25 million in North American trading profit—less than half its original forecast.

The reputational damage is compounded by the fact that supplier income, often tied to promotional deals, is notoriously tricky to account for.

WH Smith’s misstep suggests not just a lapse in judgement, but a systemic failure in financial controls.

Table of events

MetricDetails
📊 Profit Overstatement£30 million
🧾 Cause of ErrorPremature recognition of supplier income
🇺🇸 Affected DivisionNorth America
📉 Share Price Impact42% drop
📉 Revised Profit Forecast£25 million (down from £54 million)
🕵️‍♂️ Audit ResponseFull review initiated by Deloitte
🏪 Strategic ContextWH Smith sold UK High Street arm earlier in 2025
📦 Supplier Income RiskOften tied to promotional deals; hard to track

This isn’t merely a spreadsheet error—it’s a strategic setback. The retailer’s pivot to travel hubs was meant to offer high-margin stability, buoyed by a captive audience.

But the accounting blunder casts doubt on the robustness of its operational oversight, especially in a market as competitive as the U.S.

With Deloitte now combing through the books, W H Smith faces a long road to restore investor confidence.

For a brand that once prided itself on reliability, this episode is a reminder that even legacy names can falter when ambition outpaces accountability.

W H Smith share price (one-month chart) 21st August 2025

Let’s hope the next chapter isn’t written in red ink.

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UK statistical blind spots: The mounting failures of the UK’s ONS

ONS failings raises concern

The Office for National Statistics (ONS), once regarded as the bedrock of Britain’s economic data, is now facing a crisis of credibility.

A string of recent failings has exposed deep-rooted issues in the agency’s data collection, processing, and publication methods—raising alarm among economists, policymakers, and watchdogs alike.

The most visible setback came in August 2025, when the ONS abruptly delayed its monthly retail sales figures, citing the need for ‘further quality assurance’. This two-week postponement, while seemingly minor, is symptomatic of broader dysfunction.

Retail data is a key indicator of consumer confidence and spending, and its delay undermines timely decision-making across government and financial sectors.

But the problems run deeper. Labour market statistics—once a gold standard—have been plagued by collapsing response rates. The Labour Force Survey, a cornerstone of employment analysis, now garners responses from fewer than 20% of participants, down from 50% a decade ago.

This erosion has left institutions like the Bank of England flying blind on crucial metrics such as wage growth and economic inactivity.

Trade data and producer price indices have also suffered from delays and revisions, prompting the Office for Statistics Regulation (OSR) to demand a full overhaul.

In June, a review led by Sir Robert Devereux identified “deep-seated” structural issues within the ONS, calling for urgent modernisation.

The resignation of ONS chief Ian Diamond in May, citing health reasons, added further instability to an already beleaguered institution.

Critics argue that the failings are not merely technical but systemic. Funding constraints, outdated methodologies, and a culture resistant to reform have all contributed to the malaise.

As Dame Meg Hillier, chair of the Treasury Select Committee, reportedly warned: ‘Wrong decisions made by these institutions can mean constituents defaulting on mortgages or losing their livelihoods’.

Efforts are underway to replace the flawed Labour Force Survey with a new ‘Transformed Labour Market Survey’, but its rollout may not be completed until 2027.

Meanwhile, the ONS is attempting to integrate alternative data sources—such as VAT records and rental prices—to bolster its national accounts. Yet progress remains slow.

In an era where data drives policy, the failings of the ONS are more than bureaucratic hiccups—they are a threat to informed governance.

Without swift and transparent reform, Britain risks making economic decisions based on statistical guesswork.

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Is BIG tech being allowed to pay its way out of the tariff turmoil

BIG tech money aids tariff avoidance

Where is the standard for the tariff line? Is this fair on the smaller businesses and the consumer? Money buys a solution without fixing the problem!

  • Nvidia and AMD have struck a deal with the U.S. government: they’ll pay 15% of their China chip sales revenues directly to Washington. This arrangement allows them to continue selling advanced chips to China despite looming export restrictions.
  • Apple, meanwhile, is going all-in on domestic investment. Tim Cook announced a $600 billion U.S. investment plan over four years, widely seen as a strategic move to dodge Trump’s proposed 100% tariffs on imported chips.

🧩 Strategic Motives

  • These deals are seen as tariff relief mechanisms, allowing companies to maintain access to key markets while appeasing the administration.
  • Analysts suggest Apple’s move could trigger a ‘domino effect’ across the tech sector, with other firms following suit to avoid punitive tariffs.
Tariff avoidance examples

⚖️ Legal & Investor Concerns

  • Some critics call the Nvidia/AMD deal a “shakedown” or even unconstitutional, likening it to a tax on exports.
  • Investors are wary of the arbitrary nature of these deals—questioning whether future administrations might play kingmaker with similar tactics.

Big Tech firms are striking strategic deals to sidestep escalating tariffs, with Apple pledging $600 billion in U.S. investments to avoid import duties, while Nvidia and AMD agree to pay 15% of their China chip revenues directly to Washington.

These moves are seen as calculated trade-offs—offering financial concessions or domestic reinvestment in exchange for continued market access. Critics argue such arrangements resemble export taxes or political bargaining, raising concerns about legality and precedent.

As tensions mount, these deals reflect a broader shift in how tech giants navigate geopolitical risk and regulatory pressure.

They buy a solution…

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Trump – tactics and turmoil – tariff U-turn count

Trump U-turns

Trump’s latest flurry of tariff U-turns has left global markets whiplashed but oddly resilient.

From threatening Swiss gold bars with a 39% levy to abruptly tweeting ‘Gold will not be Tariffed!’ The former president’s reversals have become a hallmark of his political tactic.

Investors now brace for volatility not from policy itself, but from its rapid retraction. With China tariffs delayed, praise for previously criticised CEOs, and shifting stances on Ukraine and Russia, Trump’s tactics seem less about strategy and more about spectacle.

Yet despite the chaos, markets appear unfazed—suggesting that unpredictability may now be priced in

🧠 Why So Many U-Turns?

  • Market Sensitivity: Many reversals follow stock market dips or investor backlash.
  • Diplomatic Pressure: Allies like Switzerland, India, Ukraine, Canada and Australia have pushed back hard.
  • Narrative Control: Trump often uses Truth Social to pivot public messaging rapidly.
  • Strategic Ambiguity: Some analysts argue it’s part of a negotiation tactic—others call it chaos.

🔁 Latest Trump U-Turns

TopicInitial PositionReversalDate
Gold TariffsSwiss gold bars to face 39% tariffTrump tweets “Gold will not be Tariffed!”7 Aug 2025
China Tariffs145% reciprocal tariffs to beginDelayed for 90 days12 Aug 2025
Intel CEO Lip-Bu Tan“Must resign, immediately”“His success and rise is an amazing story”11 Aug 2025
Russia-Ukraine ArmsPaused military aid to UkraineResumed shipments after backlash8 Jul 2025
India’s Role in Peace TalksCriticised India’s neutralityPraised India’s diplomatic efforts9 Aug 2025
Global TariffsImposed sweeping import taxesSuspended most tariffs within 13 hours9 Apr 2025
Epstein FilesPromised full declassificationNow downplaying and deflectingOngoing

TACO – Trump Always Chickens Out! Tactics or turmoil?

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Why do the markets appear numb to Trump’s tariff onslaught?

Trump's tariff onslaught

Despite the scale and aggression of Donald Trump’s 2025 tariff attack—averaging approximately 27% and targeting nearly 100 countries—financial markets have shown a surprisingly muted response.

Here’s a breakdown of why that might be

🧠 1. Markets Have Priced in the Chaos

  • Trump’s protectionist rhetoric and erratic trade moves have been a fixture since his first term. Investors have grown desensitized to tariff threats and now treat them as part of the geopolitical noise.
  • The April ‘Liberation Day’ announcement triggered initial volatility, but subsequent delays, exemptions, and partial deals (e.g. with the UK, EU, Japan) softened the blow.

🧮 2. Selective Impact and Exemptions

  • Tariffs are not blanket: electronics, smartphones, and some pharmaceuticals are exempt.
  • Countries like the UK and Australia face relatively low rates (10%), while others like Brazil and Switzerland are hit harder (50% and 39%).
  • For India, even the steep 50% tariff affects only 4.8% of its global exports.

🔄 3. Supply Chain Adaptation

  • Companies are already pivoting manufacturers are reshoring or shifting production to tariff-friendly countries like Vietnam and Bangladesh.
  • Agri-tech and automation investments are helping offset cost pressures in affected sectors.

💰 4. Short-Term Pain, Long-Term Strategy

  • The US expects $2.4 trillion in tariff revenue by 2035, despite $587 billion in dynamic losses.
  • Investors are recalibrating portfolios toward resilient sectors (semiconductors, automation) and geographic diversification.

🧊 5. Political Fatigue and Uncertainty Premium

  • Trump’s tariff moves are seen as political theatre, especially with his threats often followed by renegotiations or delays.
  • Markets may be holding back deeper reactions until retaliatory measures (especially from China) fully materialise.

Where now?

These tariffs spanned sectors from automotive and pharmaceuticals to semiconductors—where a 100% duty was imposed unless firms manufactured in the U.S.

While Trump framed the measures as a push to revive domestic industry and reduce trade deficits, critics argued they were legally dubious and economically disruptive, with a federal court later ruling them unconstitutional.

Despite the aggressive scope, global markets showed surprising resilience, suggesting investors had grown desensitised to Trump’s brinkmanship and were instead focusing on broader economic signals.

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Technical Signals: Cracks beneath the surface – are U.S. stocks beginning to stumble?

Stock correction?

There are increasingly credible signs that U.S. stocks may be heading into a deeper adjustment phase.

Here’s a breakdown of the key indicators and risks that suggest the current stumble could be more than a seasonal wobble. It’s just a hypothesis, but…

  • S&P 500 clinging to its 200-day moving average: While the long-term trend remains intact, short-term averages (5-day and 20-day) have turned negative.
  • Volatility Index (VIX) rising: A 7.61% surge in the 20-day average VIX suggests growing unease, even as prices remain elevated.
  • Diverging ADX readings: The S&P 500’s ADX (trend strength) is weak at 7.57, while the VIX’s ADX is strong at 45.37—classic signs of instability brewing.

🧠 Sentiment & Positioning: Optimism with Defensive Undercurrents

  • Investor sentiment is bullish (40.3%), but rising put/call ratios and a complacent Fear & Greed Index hint at hidden caution.
  • Historical parallels: Similar sentiment setups preceded corrections in 2021 and 2009. We’re not at extremes yet, but the complacency is notable.

🌍 Macroeconomic Risks: Tariffs, Fed Policy, and Structural Headwinds

  • Tariff escalation: Trump’s recent executive order raised effective tariffs to 15–20%, with new duties on rare earths and tech-critical imports.
  • Labour market weakening: July’s jobs report showed just 73,000 new jobs, with massive downward revisions to prior months. Unemployment ticked up to 4.2%.
  • Fed indecision: The central bank is split, with no clear path on rate cuts. This uncertainty is amplifying volatility.
  • Structural drag: Reduced immigration and R&D funding are eroding long-term growth potential.
  • 🛡️ Strategic Implications: How Investors Are Hedging
  • Defensive sectors like utilities, healthcare, and gold are gaining traction.
  • VIX futures and Treasury bonds are being used to hedge against volatility.
  • Emerging markets with trade deals (e.g., Vietnam, Japan) may outperform amid global realignment.
  • 🗓️ Seasonal Weakness: August and September Historically Slump
  • August is the worst month for the Dow since 1988, and the second worst for the S&P 500 and Nasdaq.
  • Wolfe Research reportedly notes average declines of 0.3% (August) and 0.7% (September) since 1990.
  • Sahm Rule: Recession indicator.

Now what?

While the broader market still shows resilience—especially in mega-cap tech—the underlying signals point to fragility.

Elevated valuations, weakening macro data, and geopolitical uncertainty are converging. A deeper correction isn’t guaranteed, but the setup is increasingly asymmetric: limited upside, growing downside risk.

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Trump’s 100% microchip tariff – A high-stakes gamble on U.S. manufacturing

U.S. 100% tariff threat on chips

President Donald Trump has announced a sweeping 100% tariff on imported semiconductors and microchips—unless companies are actively manufacturing in the United States.

The move, unveiled during an Oval Office event with Apple CEO Tim Cook, is aimed at turbocharging domestic production in a sector critical to everything from smartphones to defence systems.

Trump’s vow comes on the heels of Apple’s pledge to invest an additional $100 billion in U.S. operations over the next four years.

While the tariff exemption criteria remain vague, Trump emphasised that firms ‘committed to build in the United States’ would be spared the levy.

The announcement adds pressure to global chipmakers like Taiwan Semiconductor (TSMC), Nvidia, and GlobalFoundries, many of which have already initiated U.S. manufacturing projects.

According to the Semiconductor Industry Association, over 130 U.S.-based initiatives totalling $600 billion have been announced since 2020.

Critics warn the tariffs could disrupt global supply chains and raise costs for consumers, while supporters argue it’s a bold step toward tech sovereignty.

With AI, automotive, and defence sectors increasingly reliant on chips, the stakes couldn’t be higher.

Whether this tariff threat becomes a turning point or a trade war flashpoint remains to be seen.

Trump has a habit of unravelling as much as he ‘ravels’ – time will tell with this tariff too.

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Echoes of Dot-Com? Is AI tech leading us into another crash?

Is Wall Street AI tech in a bubble?

Wall Street is soaring on artificial intelligence optimism—but underneath the record-breaking highs lies a growing sense of déjà vu.

From stretched valuations and speculative fervour to market concentration reminiscent of the dot-com era, financial analysts and institutional veterans are asking: are we already inside a tech bubble?

Valuations Defying Gravity

At the heart of the rally are the so-called ‘Magnificent Seven’—mega-cap tech firms like Nvidia, Microsoft, Apple and Alphabet—whose forward price-to-earnings ratios have now surpassed even the frothiest moments of the 1999–2001 bubble.

Apollo Global strategist Torsten Slok has reportedly warned that current AI-driven valuations are more ‘stretched’ than ever, citing metrics that exceed dot-com records in both scale and speed.

Nvidia and Microsoft now sit atop the S&P 500 with a combined market cap north of $8 trillion. Yet much of this valuation is being driven by expected future profits—not current ones.

Bulls argue the fundamentals are stronger this time, but even they admit this rally is fragile and increasingly top-heavy.

A Narrow Rally, Broad Exposure

While the S&P 500 has reached historic highs, the gains are increasingly concentrated among just 10 companies—accounting for nearly 40% of the index’s value.

The remaining 490 firms are moving sideways, or not at all. Bank of America’s Michael Hartnett calls it the ‘biggest retail-led rally in history’, pointing to looser trading rules and margin exposure pulling everyday investors into risky tech plays.

In policy circles, reforms allowing private equity in retirement accounts and easing restrictions on day trading are amplifying volatility.

The Trump administration’s push to deregulate retail trading could worsen systemic fragility if investor sentiment turns.

Signs of Speculation

Meme stocks and penny shares are surging again. Cryptocurrency-adjacent firms are issuing AI-branded tokens.

Goldman Sachs indicators show speculative trading activity at levels only previously seen in 2000 and 2021. Yet merger activity remains robust, and consumer spending is strong—two counterweights that bulls cite as proof the rally may be sustained.

The Core Debate: Hype vs. Reality

Is AI the new internet—or just another tech bubble? It does seem to carry more utility than the early days of the internet did?

  • The Bubble View: Today’s valuations are divorced from earnings reality, driven by retail exuberance and algorithmic momentum rather than solid fundamentals.
  • The Bullish Case: Unlike the dot-com era, many of today’s tech firms are cash-rich, profitable, and genuinely transforming industry workflows.

Wells Fargo’s Chris Harvey reportedly believes the S&P 500 could hit 7,007 by year-end—driven by strong margins in tech and corporate earnings resilience.

But even he acknowledges risks if the AI hype fails to materialise into sustainable profit flows.

Bottom Line

Wall Street may be on the brink of another rebalancing moment. Whether this rally evolves into a crash, correction, pullback or a paradigm shift could depend on investor patience, regulatory restraint—and whether tech firms can actually deliver the future they’re pricing in.

That is the real question!

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Markets rally as EU–U.S. trade deal eases some tariff tension

U.S. EU tariff trade deal

European and American financial markets rallied following the announcement of a new trade pact between the EU and the U.S on Sunday 27th July 2025., easing months of escalating tensions.

The deal introduces a 15% tariff on most EU exports to the United States—well below the previously threatened 30% rate—providing greater predictability across key sectors.

Global markets surged on Monday following the announcement of a landmark trade agreement between the European Union and the United States, announced by President Donald Trump and European Commission President Ursula von der Leyen at Trump’s Turnberry golf resort in Scotland.

The deal imposes a 15% tariff on most EU exports to the U.S., significantly lower than the previously threatened 30% rate.

It would appear that Trump’s global tariff rate will end up between 15% – 20%

While still a sharp increase from pre-2025 levels—when many goods faced tariffs under 3%—the agreement has been hailed as a pragmatic compromise that averts a full-blown transatlantic trade war.

In exchange, the EU has reportedly committed to $750 billion in U.S. energy purchases and $600 billion in investment into the American economy, with further spending on military equipment also expected.

European negotiators secured zero tariffs on strategic goods such as aircraft components, select chemicals, and semiconductor equipment

Strategic exemptions for aircraft components, semiconductors and select chemicals help preserve supply chain efficiency, while agricultural and consumer goods will adapt to the new rate over time.

In return, the EU has reportedly committed to over $1.3 trillion in investments focused on U.S. infrastructure, renewable energy and defence technologies.

Investors responded positively to the agreement as futures surged

  • The FTSE 100 futures hit 9,172 overnight
  • Euro Stoxx 50 futures rose 1.3%.
  • DAX hit overnight futures high of: 24,550
  • S&P 500 and Nasdaq Tech 100 hit overnight futures highs of: 6,422 and 23,440
  • Wall Street’s major indices extended futures gains, boosted by trade optimism and tech strength.

However, European stocks trimmed back ‘futures’ gains after the opening bell.

While some concerns remain over unresolved steel and pharmaceutical tariffs, analysts view the pact as a turning point that restores confidence.

The deal sets the stage for further cooperation on digital standards, regulation and intellectual property later in 2025.

This step toward economic stability is expected to foster stronger ties and benefit export-driven industries across both regions.

Trump is getting his deals, but how good are they really?

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Trump’s self-imposed August tariff deadline looms

U.S. Tariffs

Since a little after Donald Trump’s declaration of ‘Liberation Day’ and renewed tariff threats, global markets have shown a remarkable degree of indifference.

While equities dipped briefly in April, investors appear increasingly unshaken by the looming 1st August deadline.

Several factors underpin this resilience. First, market participants have grown accustomed to political brinkmanship.

Traders now view tariff announcements as bargaining tools rather than certainties, adopting a wait-and-see approach before pricing in long-term consequences.

The episodic nature of past trade spats has dulled their impact, especially without immediate legislative backing and with Trump often pulling back last minute or extending deadlines.

The media have labelled this … TACO!

TACO – Trump Always Chickens Out: Definition – A satirical acronym coined by financial commentators to describe Donald Trump’s predictable pattern of announcing aggressive tariffs, then softening or delaying them under market pressure.

Second, economic fundamentals remain firm. Corporate earnings continue to surpass expectations, and key indicators—such as job growth and consumer spending—suggest sustained momentum in major economies.

As a result, the tariff narrative has taken a back seat to earnings reports and central bank manoeuvres.

Third, diversification strategies have matured since the 2018–2020 trade wars. Many multinationals have already restructured supply chains, buffered risk through regional trade agreements, and hedged exposure to volatile sectors.

This strategic evolution makes markets less sensitive to unilateral tariff threats, especially if they lack multilateral support.

Analysts note that Trump’s rhetoric still carries weight politically, but the financial world operates on evidence, not headlines. As one strategist quipped, ‘Markets don’t trade on bluster; they trade on impact’.

That’s all very well – but markets can be fickle and reflect sentiment too.

With investors focused on earnings and monetary policy, tariff drama may remain background noise—unless policy becomes policy.

Until then, the markets seem content to roll with it!

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Markets appear to dismiss Trump’s tariff threats – but will this prove to be unwise?

Super Chicken

Despite President Donald Trump’s renewed push for sweeping tariffs, global markets appear unfazed.

Trump issued letters to 14 countries – including Japan, South Korea, and Malaysia—outlining new import levies ranging from 25% to 40%, set to take effect on 1st August 2025. More letters then followed.

Yet, major indices like the FTSE 100 and Nikkei 225 barely flinched, with some even posting modest gains.

So, who’s right—the president or the markets?

Trump insists tariffs are essential to redress trade imbalances and bring manufacturing back to the U.S. The EU also faces higher tariffs.

He’s floated extreme measures, including a 200% tariff on pharmaceuticals and a 50% levy on copper.

His administration argues these moves will strengthen domestic industry and reduce reliance on foreign supply chains.

However, investors seem to be betting on a familiar pattern: Trump talks tough but ultimately softens under pressure. Analysts have dubbed this the ‘TACO’ trade—Trump Always Chickens Out.

His own comments have added to the ambiguity, calling the August deadline ‘firm, but not 100% firm’.

The economic logic behind the tariffs is being questioned. Tariffs are paid by importers—often U.S. businesses and consumers—not foreign governments.

This could lead to higher prices and inflation, especially in sectors like healthcare and electronics. Some economists warn of recessionary risks for countries like Japan and South Korea.

In short, markets may be right to remain calm—for now. But if Trump follows through, the impact could be far-reaching.

With trade negotiations still in flux and only two deals (UK and Vietnam) finalised, the next few weeks will be critical. Investors may be wise not to ignore the warning signs entirely.

Whether this is brinkmanship or a genuine shift in trade policy, the stakes are high—and the clock is ticking.

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Elon Musk launches ‘America Party’ amid ongoing feud with Trump

America Party

In a dramatic twist to the U.S. political landscape, Elon Musk has announced the formation of a new political party, the America Party, following a bitter fallout with President Donald Trump over his controversial tax and spending legislation – the ‘Big Beautiful Bill‘.

Musk, once a key ally of Trump and head of the Department of Government Efficiency (DOGE), broke ranks after the passage of the so-called ‘Big Beautiful Bill‘, which Musk labelled a “disgusting abomination” that would balloon the national debt by trillions.

On U.S. Independence Day, Musk polled his followers on X, asking whether a new party should be formed. With a 2-to-1 majority voting ‘yes’, Musk declared, ‘Today, the America Party is formed to give you back your freedom’.

The party aims to challenge the entrenched two-party system by targeting a handful of swing Senate and House seats, potentially becoming a decisive force in future legislation.

Musk has pledged to support primary challengers against Republicans who backed the bill, accusing them of betraying fiscal responsibility.

Trump, clearly irked, dismissed Musk’s move as ‘ridiculous’, reportedly stating, ‘It’s always been a two-party system… third parties have never worked’.

He added on Truth Social, ‘Elon Musk has gone completely off the rails… becoming a train wreck over the past five weeks’.

The feud has escalated rapidly, with Trump threatening to revoke federal subsidies for Musk’s companies and even suggesting deportation, despite Musk’s U.S. citizenship.

While Musk’s America Party faces steep legal and logistical hurdles, his immense wealth and online influence could make it a disruptive force.

Whether it gains traction or fizzles out remains to be seen but it’s clear the ‘love’ between Musk and Trump is officially over.

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U.S. debt surges close to $37 trillion after ‘Big Beautiful Bill’ -Elon Musk sounds alarm

High U.S. debt levels

Following the passage of President Donald Trump’s sweeping tax and spending legislation, dubbed the One Big Beautiful Bill, the U.S. national debt has officially soared to nearly $37 trillion, with projections suggesting it could hit $40 trillion by year’s end.

The bill, which extends 2017 tax cuts and introduces expansive spending on defence, border security, and domestic manufacturing, has sparked fierce debate across Washington and Wall Street.

Critics argue the legislation lacks meaningful offsets, with no new taxes or spending cuts to balance its provisions.

Interest payments alone reached $1.1 trillion in 2024, surpassing the defence budget. The Congressional Budget Office estimates the bill could add $3.3 trillion to the deficit over the next decade.

Among the most vocal opponents is tech billionaire Elon Musk, who previously served as head of the Department of Government Efficiency (DOGE).

Musk has labelled the bill a ‘disgusting abominatio’ and warned it undermines fiscal responsibility.

He has reportedly pledged to fund primary challengers against Republicans who supported the measure, accusing them of betraying their promises to reduce spending.

Musk’s concerns go beyond economics. He argues the bill reflects a broken political system dominated by self-interest, calling for the creation of a new political movement, the America Party, to restore accountability.

While the White House insists the bill will spur economic growth and eventually reduce the debt-to-GDP ratio, sceptics remain unconvinced.

With the debt ceiling raised by a record $5 trillion, the long-term implications for America’s financial stability are now front and centre.

As the dust settles, the clash between Trump’s fiscal vision and Musk’s warnings sets the stage for a turbulent political and economic period ahead.

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Trump shifts tariff ‘goal posts’ again and targets BRICS with extra 10% levy

Goal posts moved

In a fresh escalation of trade tensions, President Donald Trump has once again moved the goalposts on tariff policy, pushing the deadline for new trade deals to 1st August 2025.

This marks the second extension since the original April 2025 ‘Liberation Day’ announcement, which had already stirred global markets.

The latest twist includes a new 10% tariff targeting countries aligned with the BRICS bloc—Brazil, Russia, India, China, and South Africa – along with newer members such as Iran and the UAE.

Trump declared on Truth Social that ‘any country aligning themselves with the Anti-American policies of BRICS will be charged an ADDITIONAL 10% tariff. There will be no exceptions’.

The move has drawn sharp criticism from BRICS leaders, who condemned the tariffs as ‘indiscriminate’ and warned of rising protectionism. Industrial metals, including copper and aluminium, saw immediate price drops amid fears of disrupted supply chains.

While the White House insists the new deadline allows more time for negotiation, analysts warn the uncertainty could dampen global trade and investor confidence.

With letters outlining tariff terms expected to be sent this week, investors and market makers watch closely as Trump’s trade strategy continues to evolve or unravel.

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From Missiles to Tariffs: A desensitised stock market faces Trump’s new world

Markets desensitised to U.S. policy making

In years past, the mere hint of U.S. airstrikes or heightened geopolitical tension would send global stock markets into panic mode.

Yet, following President Trump’s re-election and his increasingly aggressive foreign policy stance, investor reactions have become notably muted.

From missile strikes on Iranian nuclear sites to an orchestrated ceasefire between Iran and Israel, markets have barely flinched. The question arises: are investors becoming desensitised to Trump’s geopolitical theatre?

Take the latest skirmish between Iran and Israel. After nearly two weeks of missile exchanges, Trump’s announcement of a ‘complete and total ceasefire’ barely nudged the S&P 500.

That calm came despite the U.S. launching pre-emptive strikes on Iranian facilities and absorbing retaliatory attacks on its military base in Qatar.

In another era, or under a different administration even, such developments might have triggered a broad risk-off sentiment. Instead, Wall Street just shrugged.

One reason may be fatigue. Trump’s approach – rife with tariffs, sanctions, and sudden reversals – has bred a kind of market immunity.

Investors, well-versed in the rhythm of Trump’s provocations, have begun treating them as background noise. His revived tariff agenda, particularly the threats aimed once again at China and EU auto imports, has likewise failed to prompt major selloffs.

Similarly, the ongoing Russia-Ukraine conflict, once a source of intense volatility, now registers as a strategic stalemate in the market’s eyes.

While Trump’s rhetoric surrounding Ukraine has shifted unpredictably, investors appear more focused on earnings, inflation data, and central bank signals than on diplomatic fallout and war!

This is not to suggest markets are indifferent to geopolitical risk, but rather that they’ve adapted. Algorithmic trading models may be increasingly geared to discount Trump’s headline-grabbing tactics, while institutional investors hedge through gold, volatility indices, or energy plays without dumping equities outright.

Critics argue this detachment is dangerous. Should a flashpoint spiral out of control, be it over Hormuz, Ukraine, or Taiwan, the slow-boiling complacency could leave portfolios badly exposed.

Still, for now, Trump’s policies are being priced in not with panic, but with complacency maybe.

The real story may not be what Trump does next, but how long the markets can continue to look away.

Trump announces he had brokered ceasefire between Israel and Iran?

Tensions between Israel and Iran reached a boiling point after 12 days of cross-border missile and drone strikes.

The situation escalated further when U.S. forces under President Trump launched targeted airstrikes on key Iranian nuclear sites, Fordow, Natanz, and Isfahan, prompting a direct Iranian missile response on a U.S. base in Qatar.

In a dramatic turn, President Trump announced what he called a ‘Complete and Total CEASEFIRE‘ – announced on Truth Social. According to Trump’s plan, Iran would begin the ceasefire immediately, with Israel to follow 12 hours later.

The truce would reportedly be considered complete after 24 hours if all attacks stopped.

While Trump touted the ceasefire as a triumph of ‘peace through strength’, analysts questioned the ceasefire’s enforceability – especially since missile exchanges reportedly continued despite the announcement.

Nonetheless, Trump claimed credit for halting the region’s slide into all-out war without committing to prolonged U.S. military involvement.

Critics argue Trump’s strategy relies more on military pressure and media theatrics than diplomatic engagement.

Supporters counter that his boldness forced both sides to the table. Either way, the world is watching to see whether this fragile peace endures – or erupts again in fire.

If this turns out to be a masterstroke in political brinkmanship – hats off to Trump, I guess. Whichever way you look at it, the precision U.S. strike on Iran was exactly that – precision. And, you have to take note.

Iran has been weakened, and this may even influence Russia’s war on Ukraine. Hopefully Israel with Palestine too – regardless of stock market reaction.

And that has to be a good thing!

But has Israel finished their war?

Despite all the noise regarding stock market reaction, one thing is for certain – the anxiety and worry for the people of the Middle East is unquestionable.

It’s not a happy time.

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China suffers U.S. tariff driven falls in exports and increased deflation concerns

China exports to U.S. suffer due to tariffs

China’s economic landscape is facing mounting challenges as exports to the United States plummet and consumer prices decline, sparking fears of deflation.

The latest trade data reveals that Chinese exports to the U.S. fell by 34.5% in May 2025, marking the sharpest drop in over five years. This decline comes despite a temporary trade truce that paused most tariffs for 90 days.

China’s consumer prices have continued their downward trend, raising concerns about deflation and its long-term impact on the economy.

The sharp fall in exports is largely attributed to high U.S. tariffs and weakening demand. While China’s overall exports grew by 4.8%, shipments to the U.S. suffered significantly, reflecting the ongoing trade tensions between the two economic giants.

Imports from the U.S. also dropped by 18%, further shrinking China’s trade surplus with America. In response, Chinese exporters are shifting their focus to other markets, particularly Southeast Asia and Europe, where demand remains relatively strong.

China’s CPI reading

At the same time, China’s consumer price index (CPI) fell by 0.1% in May 2025, deepening concerns about deflation. Deflation, the opposite of inflation, can lead to lower corporate profits, wage cuts, and job losses, creating a vicious cycle of economic stagnation.

The decline in consumer prices is largely driven by weak domestic demand, exacerbated by the ongoing real estate crisis. Many Chinese consumers are hesitant to spend, fearing further declines in property values and economic uncertainty.

China’s rare earth materials olive branch

China appears to have offered U.S. and European auto manufacturers a reprieve after industry groups warned of increasing production threats over a rare earth shortage.

China’s Ministry of Commerce on Saturday 7th June 2025 reportedly said it was willing to establish a so-called ‘green channel’ for eligible export licence applications to expedite the approval process to European Union firms. 

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What exactly is Trump’s ‘Big Beautiful Bill’ that Musk hates so much?

Big Beautiful Bill

Trump calls it his ‘Big Beautiful Bill’, but Musk calls it a ‘Disgusting Abomination’ – who’s right?

Trump’s Big Beautiful Bill is a sweeping tax and spending package aimed at making his 2017 tax cuts permanent while introducing new tax breaks and budget reforms.

It eliminates taxes on tips and overtime, raises the State and Local Tax (SALT) deduction cap, and creates government-funded savings accounts for newborns.

The bill also imposes stricter Medicaid work requirements, cuts funding for green energy incentives, and repeals taxes on gun silencers and indoor tanning.

Critics, including Elon Musk, argue it will increase the budget deficit by $2.5 trillion, burdening future generations with unsustainable U.S. debt.

Musk’s opposition to the Bill

Elon Musk has fiercely opposed Trump’s Big Beautiful Bill, calling it a “disgusting abomination”.

His main concerns include:

Massive Spending & Deficit Growth: Musk argues the bill adds $2.5 trillion to the federal deficit, saddling future generations with unsustainable debt.

Pork-Filled Legislation: He claims the bill is packed with wasteful spending that benefits political allies rather than the American people.

Cuts to EV & Solar Incentives: The bill removes tax credits for electric vehicles and solar energy, which directly impacts Tesla and Musk’s clean energy initiatives.

Unfair Favouritism: Musk believes the bill protects oil & gas subsidies while cutting incentives for renewable energy.

Lack of Transparency: He insists the bill was rushed through Congress without proper review, saying even lawmakers barely had time to read it.

Trump, on the other hand, has dismissed Musk’s criticism, saying he’s “very disappointed” and believes Musk is upset mainly because of the EV tax credit removal.

The feud continues to escalate, with Musk urging lawmakers to “kill the bill.”

Who does the Bill really benefit?

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Trump and Musk feud – love to hate in 137 days – a billionaire brawl

Trump Musk Argue

It’s a worry – arguably the most powerful man in the world and the richest man in the world in a highly visible fallout.

Unrest and distrust at the top of U.S. government and the and in the corporate world – so what’s new?

Donald Trump and Elon Musk, once allies, have engaged in a heated public feud over a tax and spending bill. The conflict began when Musk criticised Trump’s “Big Beautiful Bill,” calling it a “disgusting abomination” and warning it would increase the budget deficit. Trump retaliated on Truth Social, calling Musk “CRAZY” and threatening to terminate billions of dollars in government contracts for his companies.

Musk fired back on X, claiming Trump would have lost the election without his support and accusing him of being named in the unreleased Epstein files.

The spat has had financial repercussions, with Tesla’s stock plummeting over 14%, wiping out $152 billion in market value. Investors fear the fallout could impact Tesla’s regulatory environment under Trump’s administration.

Tesla 5-day chart

Tesla 5-day chart – 14% fall

Political figures have weighed in, with billionaire Bill Ackman urging the two to reconcile, while Steve Bannon suggested Trump should seize SpaceX under the Defence Production Act. Musk also polled followers on whether to create a new political party, gaining support from Mark Cuban and Andrew Yang.

It got worse

Elon Musk escalated his feud with Donald Trump by making explosive claims that Trump appears in the Epstein files, suggesting that this is why they have not been made public. Musk posted on X, “Time to drop the really big bomb: Donald Trump is in the Epstein files. That is the real reason they have not been made public.

“Have a nice day, DJT!”. He later doubled down, telling followers to “mark this post for the future” and insisting that “the truth will come out”.

Trump has denied any wrongdoing and dismissed Musk’s claims as retaliation for his tax bill. The White House press secretary called Musk’s comments “an unfortunate episode” and insisted that Trump is focused on passing his legislation.

Musk also endorsed a call for Trump’s impeachment, agreeing with a post that suggested Vice President JD Vance should replace Trump. This marks a dramatic shift, as Musk was previously a close ally of Trump and even held a government advisory role.

The feud continues to escalate, with Musk calling for the bill’s rejection and Trump defending it as a historic tax cut.

The position and authority of U.S. President Trump have been challenged. How will tariff trade negotiations and his standing with other world leaders progress from here?

I do have a couple of questions: why did Musk back Trump in the first place and, at what point in the 137 ‘love in’ days did he know about the Epstein link (if indeed there is one)?

Or did he know before?

Who to trust?

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Well – that didn’t last long – is the ‘love in’ over already?

Elon Musk and Trump

Elon Musk has dramatically distanced himself from Donald Trump’s latest tax-and-spending bill, branding it a ‘disgusting abomination’ in a fiery post on X.

The Tesla and SpaceX CEO, once a key financial backer of Trump’s 2024 campaign, has now turned against the administration’s ‘One Big Beautiful Bill’, warning that it will explode the federal deficit and burden American taxpayers with unsustainable U.S. debt.

Musk’s frustration boiled over as he accused lawmakers of reckless spending, calling out those who voted for the bill: ‘Shame on you. You know you did wrong’.

His criticism comes just days after leaving his role as head of the Department of Government Efficiency (DOGE), where he had pushed for aggressive cost-cutting measures.

The White House, however, remains unmoved. Press Secretary Karoline Leavitt dismissed Musk’s remarks, insisting that Trump is ‘sticking to it’ and that the bill will drive economic growth.

With Republican deficit hawks rallying behind Musk’s concerns, the billionaire’s influence in Washington is far from over.

His next move? Firing back at politicians who, in his words, ‘betrayed the American people.’

Elon Musk’s fiery critique of Trump’s ‘One Big Beautiful Bill’ has raised concerns for the Department of Government Efficiency (DOGE), an initiative he once led.

His departure from DOGE signals instability (much of which he created) within the agency, which had been pushing for aggressive cost-cutting measures and anti-waste policies.

Without Musk’s influence, DOGE could lose traction, allowing excessive spending to go unchecked. Additionally, Musk’s fallout with Trump might weaken DOGE’s ability to implement reforms, as its credibility is tied to his vision.

The question now is whether DOGE can remain a force for fiscal responsibility, or whether it will become just another bureaucratic arm.

Mid-terms are coming!

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OECD cuts U.S. growth forecast amid Trump’s tariff chaos

OECD U.S. data

The Organisation for Economic Co-operation and Development (OECD) has sharply downgraded its U.S. growth forecast, citing economic uncertainty and the impact of President Donald Trump’s tariff policies.

The OECD now expects the U.S. economy to expand by just 1.6% in 2025 and 1.5% in 2026, a significant cut from its previous estimate of 2.2% for 2025.

The report highlights several factors contributing to the slowdown, including elevated policy uncertainty, reduced net immigration, and a shrinking federal workforce.

The OECD also warns that higher trade barriers could further dampen business confidence and investment.

Global growth projections have also been revised downward, with the OECD stating that the slowdown is most pronounced in North America, particularly in the U.S., Canada, and Mexico.

The organisation reportedly notes that U.S. tariff-related disruptions are expected to push inflation higher, although weaker commodity prices may offset some of the impact.

The OECD’s latest outlook underscores the growing challenges facing the U.S. economy as trade tensions persist.

With tariffs fluctuating due to ongoing ‘stop start’ legal interventions, businesses and investors remain cautious about the future.

The coming months will be crucial in determining whether policymakers can stabilise growth and restore confidence in the market.

Stop the tariffs and all will be fine.

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China’s manufacturing sector experiences decline amid Tariff chaos

China factory data

China’s manufacturing activity took an unexpected hit in May 2025, marking its steepest decline since September 2022.

The Caixin/S&P Global manufacturing PMI fell to 48.3, signalling contraction for the first time in eight months. This downturn comes as U.S. tariffs begin to weigh heavily on Chinese exports, dampening global demand and disrupting supply chains.

The latest data reveals that new export orders shrank for the second consecutive month, hitting their lowest level since July 2023.

Factory output also contracted for the first time since October 2023, reflecting the broader economic slowdown. Analysts attribute this slump to the reinstatement of sweeping U.S. tariffs, which were briefly halted before being reimposed by a federal appeals court.

Despite a temporary trade truce between the U.S. and China, tensions remain high, with both sides accusing each other of violating agreements.

The uncertainty surrounding trade policies has led Chinese manufacturers to cut jobs at the fastest pace since the start of the year, further exacerbating economic concerns.

China’s Premier Li Qiang has hinted at new policy tools, including unconventional measures to stabilise the economy. However, with tariffs set to remain high and structural challenges persisting, experts predict continued pressure on China’s industrial sector.

As the world’s second-largest economy grapples with these headwinds, the coming months will be crucial in determining whether Beijing can implement effective strategies to counteract the impact of tariffs and restore manufacturing momentum.

Caixin/S&P Global manufacturing PMI survey

The report was based on the Caixin/S&P Global manufacturing PMI survey, which is a private-sector survey that tracks China’s manufacturing activity.

This survey is conducted mid-month and covers over 500 mostly export-oriented businesses, making it distinct from China’s official PMI, which samples 3,000 companies and is compiled at month-end.

The Caixin PMI tends to focus more on small and medium-sized enterprises, whereas the official PMI aligns more closely with industrial output.

In May, the Caixin PMI fell to 48.3, marking its first contraction in eight months. The decline was largely driven by shrinking new export orders, which hit their lowest level since July 2023.

The survey also showed that employment in the manufacturing sector declined at the fastest pace since January, reflecting the broader economic slowdown.

One key difference between the Caixin PMI and the official PMI is their timing. The Caixin survey is conducted earlier in the month, meaning it may not fully capture policy changes or trade developments that occur later.

For example, economists noted that the effect of the tariff de-escalation in mid-May may not have been reflected in the Caixin PMI results