(April 21-26, 2025)
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How a presidential tweet triggered a rollercoaster recovery
The market's most volatile week of 2025 began with a presidential broadside against the Federal Reserve. When Trump tweeted that Fed Chair Powell was "completely clueless" and should be fired, markets tumbled amid fears of political interference in monetary policy. Treasury Secretary Bessent's comment that Trump was "studying ways to remove Powell" sent Treasury yields into their most dramatic steepening since March 2020 as the yield curve priced in both potential policy instability and inflation concerns.
What followed was market whiplash of historic proportions. By Thursday, Trump had reversed course, stating he had "no intention of firing Powell," while simultaneously pressuring him to cut rates. Meanwhile, rumors circulated that the White House was considering cutting China tariffs to "de-escalate the trade war." The S&P 500 rebounded 4.6% for the week, with the Nasdaq outperforming at 6.1% despite continued mixed messages on trade.
This pattern—create crisis, then resolve it—has emerged as the administration's signature negotiating tactic. But markets are beginning to discern method in the madness. After the dust settled, Treasury yields had fallen dramatically, with the 10-year ending the week at 4.27%, well below Monday's peak of 4.41%. Meanwhile, fed funds futures priced in 89bps of rate cuts by December, up from 87bps at the start of the week.
Behind the scenes, the real story may be the "Fed put" reasserting itself. Fed officials Waller and Hammack both signaled they would treat tariff-related inflation as transitory, with Hammack even opening the door to a June rate cut. This dovish shift suggests the Fed understands the risk that trade uncertainty poses to economic growth—precisely what the administration likely intended.
For investors, this week demonstrates that market narratives remain subordinate to positioning and flows. The same crosscurrents that drove the quarter's "three-act drama" continue to dominate: political uncertainty, AI optimism, and liquidity concerns. Those who maintained discipline amid the chaos were rewarded with a rapid recovery, reinforcing the notion that in this bifurcated market, patience often proves the better part of valor.
Consecutive gains. From Tuesday-Thursday, the S&P 500 was up at least 1.5% for three days in a row. This isn't stuff you see in bear market rallies or short covering rallies. You see this before times of strong performance. Higher 10 out of 10 times a year later and up 21.6% on average.
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· Sectoral Divergence: Manufacturing showed unexpected resilience (PMI 50.7) while services decelerated (PMI 51.4), indicating uneven impacts from tariff uncertainty across different economic sectors.
· Headline Strength, Underlying Weakness: Both housing and durable goods data posted superficially strong numbers but showed concerning underlying trends—housing faces forecasted weakness due to elevated mortgage rates, while the 9.2% surge in durable goods was almost entirely from volatile aircraft orders.
· Business Hesitation: Core capital goods orders were flat, missing expectations and suggesting businesses are delaying investments amid trade uncertainty—a signal reinforced by the Fed's Beige Book noting firms taking a "wait-and-see approach to employment."
· Consumer Anxiety: Despite modest improvement in sentiment (UMich 52.2, up from 50.8), consumers continue to perceive significant risks related to trade policy and inflation, with business expectations about the year ahead dropping to one of the lowest levels since the pandemic.
Alphabet silenced skeptics with a stellar quarter that sent shares surging to new all-time highs. The Google parent reported revenue of $90.2 billion (up 12% YoY) and earnings per share of $2.81 (up 49% YoY), both handily beating Wall Street expectations despite ongoing regulatory challenges. It's worth noting that EPS benefited significantly from an $8.0 billion unrealized gain on an equity investment, which boosted earnings per share by approximately $0.62. Even adjusting for this one-time gain, the financial performance remains impressive.
What impressed investors most was management's commentary on Chinese advertising demand—a key concern given trade tensions. While confirming that the removal of tariff exemptions for Chinese goods would impact 2025 advertising revenue, the company characterized the effect as merely "slight," suggesting that many of these ad placements are being quickly filled by other merchants rather than remaining empty.
Search and YouTube continue firing on all cylinders, with search revenue up 9.5% and YouTube ad revenue showing growth of 10.4% YoY. YouTube maintained its position as the #1 streaming platform by market share for the eighth consecutive quarter according to Nielsen data, with 125 million Premium subscribers (up 25% YoY).
Alphabet's cloud business remained capacity constrained but still delivered strong growth with enhanced AI capabilities. The company unveiled its 7th generation Tensor Processing Unit called "Ironwood," boasting 10x compute power improvements and nearly 100% efficiency gains versus the previous generation. Meanwhile, its autonomous driving unit Waymo continues scaling rapidly with paid rides growing 5x year-over-year to 250,000 weekly trips.
Alphabet delivered an exceptionally strong quarter financially, demonstrating the continued power of its core businesses and meaningful progress in Cloud profitability. Yet a fundamental tension remains at the heart of Alphabet's story: today's financial strength provides the fuel for a massive, necessary, but uncertain AI transition, all while navigating potentially company-altering regulatory challenges. From an investor perspective, this creates a fascinating valuation puzzle.
As Alphabet moves forward, key questions persist:
The Q1 2025 results provided positive data points across the board, but the marathon continues—as do the external battles that may ultimately reshape Alphabet's future.
Tesla delivered a challenging quarter with significant misses across the board, as revenue fell 9.8% below expectations, largely driven by a 15% miss in automotive revenue. CEO Elon Musk unsurprisingly pulled full-year guidance for both automotive and energy storage growth, citing the unpredictable impact of tariffs on both cost structure and demand forecasting.
Despite these headwinds, there were bright spots in the report. Automotive gross margins excluding regulatory credits beat expectations by 90 basis points, while energy storage and generation continues to find strong year-over-year growth. Tesla's battery business posted record Powerwall deployments for the fourth consecutive quarter and crossed 1 gigawatt hour of installations for the first time.
The Model Y production line changes across all four major manufacturing hubs contributed to the quarter's weakness, though management had explicitly forecasted this impact. More concerning is the continued market share erosion across regions—most notably an 11-point drop in California. As management acknowledged, while trade war uncertainty is clearly the primary culprit for underwhelming results, competitive pressure and political factors may also be influencing performance.
For investors focused on Tesla's future rather than present financial results, management offered reassurance by reiterating all product timelines. The affordable mass-market model remains on schedule to begin production before the end of June, the Robotaxi pilot launch is still planned for Austin in June with initial vehicles based on Model Y, and Optimus robot deployment in Tesla factories is on track for 2025. As Musk noted during the call, "We've been on the edge of death a dozen times. This is not one of those times."
With shares trading at 90× forward earnings and reports that China tariffs might "fall substantially," Tesla's fortunes appear increasingly tied to both trade policy developments and the company's ability to execute on its ambitious technology roadmap.
ServiceNow delivered a remarkably resilient quarter amid the broader market volatility, showcasing the defensive characteristics of mission-critical enterprise software. The workflow automation leader beat revenue expectations with $3 billion in subscription revenue (19% Y/Y growth) and delivered earnings of $3.83 per share, well above the $3.57 consensus.
What particularly impressed analysts was the company's continued AI momentum. NOW's "Plus SKU" deals (which bundle its AI capabilities) grew 4x YoY and beat internal expectations, with 39 deals including three or more AI products. Average contract value per Plus deal rose 33% QpQ as clients continued to deploy larger implementations.
The company unveiled its latest AI platform update called "Yokohama," aimed at vastly expanding its agentic AI capabilities. Its new AI Agent Orchestrator allows companies to build goal-oriented AI systems that pull information from various sources and organize it in an actionable manner—without requiring extensive in-house AI expertise.
ServiceNow's U.S. public sector business was another standout, with net new annual contract value rising 30% YoY as it signed a brand new federal agency as a client. Management expects the Department of Government Efficiency to ultimately accelerate public sector demand as agencies look to "do more with less" through cohesive software platforms.
For the full year, ServiceNow slightly raised annual subscription revenue guidance while reiterating its margin targets, taking what management described as a "prudent approach to 2025" by only including a portion of the quarter's outperformance in its updated targets.
Disclaimer: This musing is for informational purposes only and should not be considered as investment advice.
By
Kristal Advisors
April 29, 2025
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We are licensed in Singapore, Hong Kong and India. Kristal Advisors (SG) Pte. Ltd. presently operates under the CMS license by the Monetary Authority of Singapore (MAS). Kristal Advisors (HK) Ltd is licensed and regulated by the Securities and Futures Commission (SFC) to carry out Type 4 and Type 9 regulated activities and is not involved in the discretionary management of any collective investment scheme. Kristal Advisors Private Ltd. presently operates as a Registered Investment Advisor under the jurisdiction of the Securities and Exchange Board of India (SEBI).
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