Market Overview, June 10, 2025
Summary
The speaker’s macro view is unchanged: US hard data is slowly deteriorating, while soft data weakened first after Liberation Day; the base case remains a soft landing this year, with a trough around early next year. Nonfarm payrolls came in around 130k, above the 120k consensus, but prior months were revised slightly lower; GDP turning negative is “possible, but not certain.” “Overall, the data was somewhat positive this week, but it does not change the gradual downward trend.”
The market has rapidly rebuilt from the low positioning that followed the March-April liquidation; short-term positioning is no longer cheap, but it is still far from the crowded extremes of year-end. Global Prime Book buying reached positive 3 sigma in May, while systematic exposure was around half capacity and at the 20–30th historical percentile, and asset-manager exposure was around the 30–40th percentile; the speaker’s own positioning was around 40% or lower. “There is some pressure on capital in the short term”; his choice is to “do nothing.”
AI, cloud and semiconductor earnings remain the strongest reasons to add risk, but the outcome of trade talks will determine whether positioning can truly return to pre-Liberation Day levels. Data from Microsoft, Nvidia and others was described as “very solid”; token utilization and cloud capex support chip demand this year, with growth more likely to slow next year. Meanwhile, US and Chinese messaging on international students, Taiwan and rare earths remains inconsistent, and negotiations may continue to “start tough, then back down.”
The Big Beautiful Bill extends the fiscal cycle: it may support growth and corporate profits, but at the cost of inflation and long-term rates—not the “US debt crisis” that the speaker rejects. Since the pandemic, US growth has been driven mainly by public-sector spending, while private-sector growth has stayed below 2%; the bill is very likely to pass and keep spending, but the money may not reach households until March. The speaker expects profitable, growth-oriented assets to outperform stores of value such as gold and bitcoin during the fiscal cycle.
Section 899 is the bill’s most worrying potential capital-market backlash: it retaliates against foreign taxes on US companies, but could also reduce FDI into the United States. The speaker said corporate tax rates could rise progressively to 41% over four years, while taxes related to some earnings repatriation could reach 50%; Canada, Germany and the UK are also important sources of capital. “This is a double-edged sword.” Real money has begun adjusting its dollar hedges, which could keep pressure on the dollar.
The dollar faces outflow pressure but is not a suitable long-term outright short; bitcoin’s rise is instead explained by more than $10B in spot-futures arbitrage, not a faith trade driven by monetary or fiscal expansion. Financial crises and problems originating in the US itself could trigger dollar repatriation, while higher long-end rates could again attract capital; if forced to short the dollar, the speaker would only consider using options to express the view against Asian currencies. On bitcoin, “it’s not faith in bitcoin, but arbitrage in bitcoin”; if funding cannot be maintained, both the spot and short-futures positions will ultimately be unwound.
Deep dive
1. Data is slowly deteriorating, while the S&P has decoupled from the economy
Headline nonfarm payrolls came in around 130k last week, above the 120k consensus and avoiding the tail-risk deterioration the market feared; but historical data was revised slightly lower, and hard data remains in a slow weakening trend. “Not as bad as expected” does not mean the trend has reversed.
After Liberation Day, tariffs and market expectations weighed on corporate investment and household consumption, sending soft data clearly lower. Consumer confidence rebounded slightly last week, but the overall trend remains down. The speaker was explicit: “The downward trend is certain.”
His base case remains a soft landing this year, with a trough around early next year; whether GDP turns negative and whether the recession deepens are “possible, but not certain.” The real disconnect is that the S&P has moved clearly against the economic data, with fundamentals-based valuations already elevated.
2. May buying reached 3 sigma, but absolute positioning still has room to rise
Global Prime Book buying reached positive 3 sigma in May, making the short-term setup dangerous. The overbought condition is linked to the oversold conditions of March and April: after Liberation Day, real money and hedge funds liquidated aggressively, then bought back some exposure at the lows, but largely did not rebuild their full positions.
The speaker’s own positioning is around 40% or lower, and many asset managers around him have also not restored their prior holdings. Systematic exposure is around half capacity, at only the 20–30th historical percentile; asset-manager exposure is around the 30–40th percentile. “Buying aggressively” and “being heavily positioned” are therefore not the same thing.
For institutions to keep adding, three questions need answers: can hard data stabilize, something that may not become clear until the third quarter, fourth quarter or even the first quarter of next year; can corporate earnings deliver; and can the US-China trade deal produce a credible outcome? In the short term, none of the three is strong enough to drive broad-based buying.
CTA, vol-control and other systematic strategies have already increased exposure materially in May, making it difficult to keep buying at the same pace over the next few months. The speaker’s portfolio view is that capital will remain under pressure in the short term; the next month or two may still be manageable, but the market will then have to confront the effects of recession. His conclusion: “My personal choice on positioning is to do nothing.”
3. AI earnings remain solid, but trade and political uncertainty are still high
Semiconductors, AI and cloud remain the strongest parts of the earnings picture. Data from Microsoft, Nvidia and others was “very hard, very solid.” Even if the economy enters recession, the speaker believes these companies will not be affected, because the core question is whether “anyone is using the tokens.”
Token utilization remains healthy, and cloud companies will clearly continue spending on capex. Chip purchasing data should also be strong this year; the real slowdown is more likely to come in next year’s chip-purchasing growth. AI and semiconductors, which had previously been underappreciated and heavily sold off, may remain key areas for asset managers rebuilding exposure.
Following the US-China call, the two sides gave differing public accounts of international-student screening, Taiwan and rare earths. China has begun easing rare-earth exports, but the speaker expects further back-and-forth after the second round of talks. Trump may “start tough, then back down,” which is not enough for institutions to immediately restore their pre-April positioning.
Musk and Trump fell out over the Big Beautiful Bill, and Musk has returned to Tesla, but Trump still has tools such as subsidies to apply short-term pressure. The speaker remains bullish on Tesla, while arguing that a US president’s ability to influence corporate groups has limits and cannot match the leverage available to leaders in other countries; Musk’s “Where is Jack Ma?” was cited as a contrast. The large protest that erupted after Los Angeles resumed managing undocumented immigration further amplified the political news flow.
4. Fiscal expansion supports profits, but pushes up long-term rates
The speaker’s core claim on US fiscal policy is: “The US does not have a debt problem.” The support comes from the dollar, household balance sheets and corporate earnings. Fiscal expansion is like “an addiction to drugs”: austerity cannot cure it; the way out is through growth and new technology.
Since the pandemic, US growth has been driven mainly by increased public-sector spending, while private-sector growth has remained below 2%. The Big Beautiful Bill is very likely to pass and keep spending, making it a medium- to long-term positive for growth and profit margins. But “the bill won’t reach people’s hands until March,” leaving the market exposed to recession and other risks before those longer-term benefits arrive.
The fiscal cycle is also playing out in Germany and China, while the Democratic Party that won South Korea’s election likewise favors expansion. China’s difference is that private-sector balance sheets are too weak to restart consumption. The speaker referenced possible reports from Morgan Stanley and UBS on China’s deflation and consumption, and said public consumption data is being cosmetically presented while the reality is worse.
The side effects of fiscal expansion are inflation and higher rates, not a collapse in confidence in the dollar. The 30-year yield breaking out of its long-term range and the equity risk premium approaching zero are occurring against the backdrop of this fiscal cycle. In his framework, the monetary cycle favors stores of value such as gold and bitcoin, while the fiscal cycle favors profitable, growth-oriented assets outperforming stores of value.
5. Section 899 could reduce FDI, while the dollar remains difficult to short outright
Section 899 targets countries that impose digital-services taxes, the undertaxed profits rule and similar levies on US multinationals, with the aim of allowing the US to impose punitive taxes on those countries and companies. The problem is that Canada, Germany and the UK could be both targets of retaliation and major sources of FDI into the US.
The scope of the penalties could also cover passive income. The speaker said corporate tax rates could rise progressively to 41% over four years, with a 5% increase possible next year; taxes related to some earnings remittances could reach 50%. “The end result is a reduction in investment into the US.”
Real money has already begun adjusting its dollar risk. He cited Canadian and Danish pension funds, saying the hedge ratio for Canadian pension funds had been reduced from 32 to 26. Hedge-fund positioning remains broadly stable, but the dollar would come under pressure if long-term investors continued hedging. Goldman’s view on dollar valuation is only a reference point and does not necessarily directly affect currency valuation.
This is still not enough to justify a structural dollar short. In a crisis, capital would quickly flow back into the US, while higher long-end US rates could again attract funds; the ECB also cut rates by 25 basis points last week. If expressing a dollar-short view, the speaker recommends using options and trading against Asian currencies such as the yen and Taiwan dollar, betting that the US will bring exchange rates into tariff negotiations.
6. Bitcoin’s engine is basis arbitrage; the exit depends on funding
Second-by-second net trading data from Binance futures shows persistent short-selling, yet bitcoin has not fallen because the other side is buying spot and shorting futures. CME open interest is higher than Binance’s, while the trading data covers only roughly one-third of CME’s activity, suggesting that much of the positioning is hedging rather than directional trading.
The speaker estimates that CME holds more than $10B in non-directional positions, corresponding to more than $10B of ETF or spot purchases paired with futures shorts. “It’s not faith in bitcoin, but arbitrage in bitcoin.” The spot and futures markets are being hit asymmetrically, and persistent spot buying is pushing prices higher.
Crypto exchanges are rigidly maintaining a funding structure that allows shorts to collect fees, prompting Wall Street capital to buy spot and short futures to earn the rate. The speaker attributes the direct engine of this rally to Binance. Funding has fallen from around 20% at the start of the year to the teens; the next question is whether the structure can hold.
The higher long-end rates rise, the higher the funding required by arbitrage capital. The larger the positions, the more expensive it is to maintain the structure. “No game can be played forever.” Once there is not enough capital to support the funding rate, the more-than-$10B spot-futures hedge book will be unwound.