Weekly Investment Update (05/30/2025)

Stocks continued their upward trend this week, supported by a mix of encouraging trade developments and strong market fundamentals. A key legal development came from the U.S. Court of International Trade (CIT), which ruled against the Trump administration’s use of the International Economic Emergency Powers Act (IEEPA) to impose blanket tariffs. Although a federal appeals court has subsequently stayed the CIT ruling, we view the recent events in aggregate as a net positive for markets and expect the CIT ruling to be ultimately upheld by the Supreme Court. That said, the market has largely priced out major tariff risks, and President Trump retains several mechanisms to maintain elevated tariffs if he chooses.

We are also monitoring the potential implications of reduced tariff revenue on the tax bill currently under consideration in the Senate. While tariff income wasn't officially factored into budget scoring, it was nonetheless seen as a partial offset to the federal deficit. Any decline in this revenue could influence the stance of deficit-conscious lawmakers.

Looking ahead, we continue to focus on fundamentals, which we believe are becoming increasingly important as trade-related concerns begin to recede. In the coming months, we expect confidence indicators to improve, even as economic data begins to show a slower pace of growth. This week, for instance, consumer confidence rebounded sharply, while initial jobless claims exceeded expectations. Overall, we believe the economy remains strong enough to support corporate earnings, with major themes like artificial intelligence continuing to show momentum. Nvidia’s recent results added further evidence that AI-related investment is still booming.

Tariff Uncertainty Compounded by Conflicting Court Rulings

What is happening: On Thursday, a federal appeals court paused a Wednesday evening ruling by the U.S. Court of International Trade, which had blocked the majority of President Trump’s tariffs. The initial ruling found that the president’s legal justification for the blanket “Liberation Day” tariffs, scheduled to take effect on July 4, was not valid. Specifically, the court stated that the International Emergency Economic Powers Act (IEEPA) was not intended to address trade imbalances and therefore does not give the president unilateral authority to impose sweeping tariffs across most trading partners.

The court order also stated that fentanyl-related tariffs on China, Mexico, and Canada were not sufficiently connected to the emergency cited. However, existing sector-specific tariffs such as the 25% Section 232 tariffs on autos, steel, and aluminum imports and the Section 301 tariffs on China that were imposed during President Trump’s first term and expanded under the Biden administration remain unaffected and in place.

Why it matters: The initial ruling was expected to reduce the average U.S. tariff rate from 16% to approximately 6.5%. If ultimately upheld, the administration may pursue alternative strategies to impose tariffs, though each path would be complex and time-consuming.

The legal uncertainty surrounding tariffs comes at a pivotal time as the administration seeks to secure new trade agreements. U.S. trading partners may now reassess their negotiating position, though many are still likely to prioritize long-term stability.

Uncertainty over future tariff revenue could also complicate the passing of the One Big Beautiful Bill. The blocked tariffs were expected to generate roughly $240 billion annually. While not formally included in budget offset calculations, the revenue represented a meaningful increase in government income and was viewed as a tool to gain support from fiscal conservatives in the Senate. Their removal could undermine the reconciliation bill already passed by the House, which, if enacted as is, would raise the federal deficit by $450 billion in the next fiscal year.

Beyond legislative hurdles, the potential loss of tariff revenue could worsen the U.S. fiscal outlook, push up bond yields, and force a reevaluation of economic plans. However, lower tariffs might also ease inflation pressures, potentially allowing the Federal Reserve to cut interest rates sooner. Overall, trade policy uncertainty is likely to persist into the summer, weighing on both business investment and consumer spending.

President Trump Shifts Stance on Crypto, Yet Asset Class Remains Volatile and Regulatory Backdrop Uncertain

What is happening: Since returning to office in January 2025, President Trump has adjusted his stance on cryptocurrency, evolving from a skeptic to a proponent. The current administration’s stated stance toward cryptocurrency is aimed at positioning the U.S. as a global leader in the crypto space with proposals including a Strategic Bitcoin Reserve and the development of a federal regulatory framework for digital assets. Pro-crypto appointments — such as SEC Chair Paul Atkins and White House AI and Crypto Czar venture capitalist David Sacks — reinforce this shift. Trump's family has also become directly involved in the crypto space through ventures including the $TRUMP meme coin and World Liberty Financial’s USD1 stablecoin.

Historically, cryptocurrencies, such as Bitcoin, exhibited a low correlation with traditional financial assets. During the COVID-19 pandemic, however, this changed with Bitcoin’s 30-day correlation to the S&P 500 and NASDAQ often exceeding 70% — largely driven by synchronized market responses to unprecedented monetary and fiscal stimulus, as well as shared investor risk sentiment across asset classes. More recently, Bitcoin has decoupled from traditional risk assets while its correlation with gold has increased, particularly during times of market stress. For example, in April 2025, Bitcoin's 30-day correlation with gold reached 70%, indicating a strong positive relationship. Depending on the market conditions, Bitcoin has acted like a technology stock during some periods or like gold during other periods.

Why it matters: We view cryptocurrencies as speculative, volatile, and risky assets that are best approached with caution. Prices are largely driven by speculation rather than fundamentals, such as earnings or cash flow, and large price swings — 5% to 10% in a single day — sometimes after tweets from influential figures on social media. Furthermore, the regulatory backdrop for cryptocurrency remains complex and fluid, with ongoing legal battles, a lack of comprehensive federal legislation, and variation across regulatory agencies and jurisdictions.

Given these risks, Bessemer Trust does not hold direct cryptocurrency investments in equity or fixed income portfolios. At the same time, the cryptocurrency universe has provided some unique investment opportunities within the alternatives space. For example, Bessemer’s private equity program has selective exposure to crypto-related infrastructure, where institutional and consumer adoption is increasing.