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China Claps Back, Markets Drop

📉 Wall Street Woes continue as major indices tumble on China’s vow to fight tariffs.

Author

Ankit Sinha
March 07, 2025

Silver banana goes to…


In this issue of the peel:

  • 📉 Wall Street Woes continue as major indices tumble on China’s vow to fight tariffs.

  • ​​​💶 US stocks are in a position they haven’t been in for a long time: Trailing peers in both Asia and Europe.

  • 🤖Once again, Nvidia tanks the entire market as artificial intelligence stocks hit turbulence amid valuation and competition concerns.

Market Snapshot

Student Spotlight

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Banana Bits

The Daily Poll

Is Amex’s acquisition of Center a game-changer?

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Previous Poll:

Is CrowdStrike’s AI investment smart or risky?

Smart, future-proof: 22.7% // Risky, short-term pain: 20.7% // Both, but needed: 41.5% // Just earnings hype: 15.1%

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Macro Monkey Says

A Rough Start for Wall Street

As 2025 kicks off, US equities are trailing behind their European and Asian counterparts, raising concerns about the resilience of American markets. 

While the S&P 500 and Nasdaq have struggled to gain traction, the Euro Stoxx 50 and Japan’s Nikkei 225 have surged ahead. Investors are left questioning whether this is a temporary setback or a sign of a broader shift in global market dynamics.

Why the U.S. Market is Stumbling?

Tariffs put the cherry on top, but there are several factors weighing on US stocks:

  • Monetary Policy Headwinds: The Federal Reserve has maintained a cautious stance, keeping interest rates elevated to combat inflation. This has dampened investor sentiment, particularly in high-growth sectors that thrive on cheap money.

  • Earnings Pressures: Many US companies have issued weaker-than-expected earnings forecasts, citing slowing consumer demand and higher costs.

  • Valuation Concerns: US equities, particularly in the tech-heavy Nasdaq, entered 2025 at historically high valuations, making them vulnerable to pullbacks.

Europe and Asia Power Ahead

While Wall Street stumbles, markets across the Atlantic and the Pacific are capitalizing on strong economic fundamentals:

  • Europe’s Valuation Advantage: European equities remain attractively priced compared to US stocks. The MSCI European Index is trading at a significant discount on a forward price-to-earnings basis.

  • Japan’s Resurgence: The Nikkei 225 has been buoyed by corporate reforms, a weak yen that boosts exports, and increased foreign investment.

  • China’s Stimulus Efforts: After a challenging 2024, China has rolled out aggressive stimulus measures, reviving investor confidence in its markets.

S&P 500 P/E Ratio

 

Will the US Catch Up?

Despite the rough start, Wall Street could bounce back if inflation eases and the Fed pivots to a more accommodative stance. 

Investors will be watching upcoming economic data and corporate earnings for signs of a potential turnaround. Until then, global diversification might be the winning strategy for 2025.

Career Corner

Question

I'm having trouble with accounting questions about non-cash expenses and adding them back on the cash flow statement.

For one question, I thought I had to add back interest expenses on the cash flow statement, but that was wrong, and for another question about writing down assets, I incorrectly didn't add back the write-down to the cash flow statement.

What exactly determines whether an expense should be added back on the cash flow statement?

Answer

What they’re looking for is your ability to tell something is non-cash.

Depreciation is non-cash because the cash went out the door when you bought the factory.

Asset write-down is non-cash because the cash went out the door when that asset was bought—not in the current period. Writing it down is similar to depreciation… you’re not using cash to effect that write-down.

In your example, interest IS a cash expense in the current period. No need to add anything back—that cash is going out the door this period (and interest is captured in Net Income).

Head Mentor, WSO Academy

What's Ripe

Kroger Co. (KR) 2.0%

  • The grocery giant overcame a soft outlook with better than expected earnings, proving that even in uncertain times, people still need to eat.

  • Investors cheered its cost-cutting initiatives and growth in digital sales, showing adaptability in a competitive market.

  • Inflation may be biting, but Kroger is passing the costs along—it turns out that rising food prices can be profitable!

BJ’s Wholesale Club (BJ) 12.3%

  • The warehouse retailer crushed earnings expectations thanks to higher membership fees and plans to expand into new markets like Dallas-Fort Worth.

  • With inflation pinching wallets, consumers are stocking up at bulk retailers, boosting BJ’s sales growth.

  • BJ’s is taking on Costco and Sam’s Club, proving that membership has its perks—especially for investors!

What's Rotten

Marvell Technology Inc. (MRVL) 19.8%

  • The semiconductor firm missed sales expectations, leading to concerns about slowing AI infrastructure spending.

  • A key analyst downgrade fueled the sell-off, with warnings that demand for AI chips may be cooling off.

  • Investors went from "Marvell-ous" to miserable, as the stock’s big drop short-circuited their enthusiasm.

MongoDB Inc. (MDB) 26.9%

  • The database software company slashed its full-year revenue forecast, signaling a slowdown in enterprise spending.

  • Concerns over increasing competition from cloud giants like AWS and Microsoft put pressure on the stock.

  • Investors just deleted MongoDB from their portfolios, causing the stock to crash harder than a corrupted database.

Thought Banana

American Express Expands Horizons with Center Acquisition

In a strategic move to bolster its corporate services, American Express announced its plan to acquire Center, a Seattle-based expense management startup founded in 2017 by Naveen Singh. 

This acquisition underscores Amex's commitment to enhancing its digital offerings and streamlining expense management for its corporate clients. ​

The Deal Details

  • Center's Profile: Center offers a platform that provides real-time visibility into employee spending, automates accounting tasks, and simplifies expense submission processes. The company had previously raised $30 million in Series C funding in 2023, totaling $140 million in investments to date.

  • Amex's Strategy: Historically, Amex's expense management services have been facilitated through third-party platforms like Concur and Emburse. By integrating Center's technology, Amex aims to create a seamless expense management platform that delivers more value across the commercial card payments process. The deal is expected to close in the second quarter of 2025, subject to customary closing conditions.​

Implications for the Corporate Travel and Expense Management Area

  • Market Dynamics: The corporate travel and expense management sector has witnessed significant activity, with companies seeking to capitalize on a largely untapped market. For instance, Amex Global Business Travel (GBT) announced plans in 2024 to acquire CWT for $570 million, though the deal has encountered some roadblocks. Additionally, startups like TravelPerk have raised substantial funds to position themselves as all-in-one corporate travel and expense management platforms.​

  • Competitive Edge: By acquiring Center, Amex positions itself to offer a more integrated and user-friendly experience to its corporate clients, potentially setting a new standard in the industry. This move could prompt competitors to enhance their own offerings, leading to a more innovative and efficient market landscape. A Thought-Provoking Twist

As Amex ventures deeper into the digital area with this acquisition, one can't help but ponder: Is this a strategic leap towards redefining corporate expense management, or merely a step to keep pace with the evolving fintech landscape? 

While the integration of Center's technology promises enhanced efficiency, the true measure of success will be in how seamlessly Amex can blend these new capabilities with its existing services. 

Moreover, as the lines between traditional financial services and technology continue to blur, will we see more financial giants embracing such integrations to stay relevant?

In the grand scheme, Amex's acquisition of Center is more than just a business transaction; it's a reflection of the ongoing transformation in the financial services industry, where adaptability and innovation are key to staying ahead.

The Big Question: Is Amex's acquisition of Center a game-changer for corporate expense management or just a necessary move to keep up with fintech disruptors?

Banana Brain Teaser

Previous

A store reported total sales of $385million for February of this year. If the total sales for the same month last year was $320million, approximately what was the percentage increase in sales?

Answer: 20%

Today

When positive integer x is divided by positive integer y, the remainder is 9. If x/y = 96.12, what is the value of y?

Send your guesses to [email protected]

❝

The four most dangerous words in investing are: ‘This time it’s different.

Sir John Templeton

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Happy Investing,
Chris, Vyom, Ankit & Patrick