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Good Evening! 👋
Welcome to the Bean Breakdown. Have a great week!
HEADLINES
What You Need To Know
Fed officials are growing nervous. At their May meeting, they warned that tariffs could reignite inflation and force them into a corner on rate policy. The minutes show a divided Fed navigating political pressure, rising trade tensions, and mixed economic signals. Their decision? Hold rates steady at 4.25% to 4.5% and wait for more clarity. Even with inflation cooling, Trump’s new trade policies and fiscal shifts have raised uncertainty. Officials flagged the risk of being stuck between stubborn inflation and weakening growth. For now, the Fed is holding firm. But if tariffs ramp up again, all bets are off.
Costco beat earnings expectations with an 8% sales jump, but shares fell slightly as executives warned that tariffs are putting pressure on costs. CEO Ron Vachris said Costco has already made moves to ease the impact, like sourcing more Kirkland items locally, rushing shipments before tariffs hit, and choosing to absorb the cost on essentials like eggs and bananas. Still, some prices have gone up. Flowers and other discretionary items saw increases. About 8% of Costco’s U.S. sales still come from goods imported from China. Even with the challenges, e-commerce sales grew 16%, and steady gas and grocery traffic could help Costco stay strong if tariffs continue.
Elon Musk tried to block OpenAI’s involvement in a massive AI deal with the UAE after learning that his company, xAI, wasn’t invited. The $500 billion Stargate campus includes OpenAI, Oracle, Nvidia, Cisco, and UAE firm G42. Musk reportedly told officials that President Trump would not approve the deal, causing a delay and drawing White House attention. While OpenAI stayed quiet, the White House said the partnership was a win for America. Musk, who helped fund Trump’s reelection and currently leads the Department of Government Efficiency, has long clashed with Sam Altman and tried to buy OpenAI outright for $97.4 billion earlier this year. He’s not done. Musk’s next target? Making sure xAI has a seat at the table.
Nvidia crushed earnings again, with revenue soaring 69% to $44.06 billion, fueled by exploding demand for its AI chips and massive data center growth. Data center sales hit $39.1 billion, up 73% year-over-year and now account for nearly 90% of Nvidia’s business. Still, China’s chip ban had an impact. Nvidia lost $2.5 billion in potential sales and took a $4.5 billion inventory charge tied to restricted H20 chips. CEO Jensen Huang said China’s AI chip market is “effectively closed to U.S. industry,” but still guided for $45 billion in sales next quarter. Microsoft is already ramping orders of Blackwell GPUs, and with net income up 26%, Nvidia’s AI lead is only getting stronger.
UPCOMING
What You Need To Watch
On Monday, I’ll be watching the May ISM Manufacturing PMI data. It’s one of the better indicators of how the industrial side of the economy is holding up.
On Monday, Fed Chair Jerome Powell is also speaking. I always listen closely to see how he frames inflation and future rate moves.
On Tuesday, the April JOLTS report comes out. I like this one because it gives a deeper look at job openings and hiring trends.
On Wednesday, we’ll get the May ADP employment report. It’s not perfect, but it’s a solid preview before the official jobs data.
On Thursday, the weekly jobless claims report drops. I check this every week to track real-time shifts in the labor market.
On Friday, the May jobs report is released. It’s one of the most important data points of the month for understanding where the economy is headed.
TIP
Why Understanding a Company’s Business Model Matters
Before you invest in any stock, you should be able to clearly explain how the company makes money. If you cannot, it is probably not a business you should own. Understanding the business model helps you decide whether the company has room to grow, pricing power, and a long-term advantage. Is it a one-time product sale or recurring revenue? Does it rely heavily on advertising, subscriptions, or physical goods? A simple, proven business model is often a better bet than a complicated one filled with hype. The more clearly you understand how a company operates, the more confidently you can invest in it.
CHART
BILL ACKMAN’S INVESTING
Source: @bean_wealth
TERM
Interest Rate Risk
Interest rate risk is the potential for investment losses due to changes in interest rates. When rates rise, bond prices usually fall, and companies with a lot of debt may face higher borrowing costs. For example, if you own a 10-year bond paying 3% and new bonds start offering 5%, your bond becomes less attractive, and its market value drops. Investors monitor interest rate risk closely, especially in fixed-income investments or rate-sensitive sectors like real estate and utilities. Managing this risk is key to protecting long-term returns as interest rate environments shift..
See you on Wednesday!
Cheers,
Matt Allen
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