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Core PCE Spikes—Brace Yourself

📉 Core PCE, the Fed’s favorite inflation report, came in hot and absolutely wrecked the stock market.

March 31, 2025

Silver banana goes to…




In this issue of the peel:

  • 📉 Core PCE, the Fed’s favorite inflation report, came in hot and absolutely wrecked the stock market.

  • 🚀 Gold stocks shine, WRB insurers cash in, while Lululemon and Hims & Hers take a beating.

  •  đź¤– Elon Musk did some fancy financial engineering, resulting in a boosted valuation for X.

Market Snapshot

Banana Bits

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With $10M+ in revenue, sold in 127 Best Buy stores, and 10 patents, they are primed for massive expansion.

Macro Monkey Says

Core PCE Comes in Hot

On Friday, the February Core PCE inflation numbers came in a tad higher than expected. And in this market, any slight misstep with the data leads to a massively over-dramatic reaction. That’s how things have gone in 2025.  

The index rose 0.4% month-over-month and 2.8% year-over-year, marking the highest monthly jump in a year and keeping the Fed's inflation headaches very much alive.

Quick refresher: Core PCE is the Federal Reserve’s go-to inflation measure because it strips out food and energy, aka the most unpredictable stuff in your budget. So if even this number is climbing, it’s a signal that price pressures are sticking around longer than anyone would like.

While inflation ticked up, consumer spending barely moved, rising just 0.1% after falling in January. That’s a red flag for growth—and a combo economists love to hate: rising prices + weak spending = stagflation whispers. Not ideal.

Markets took the news as you’d expect them to. Poorly. The S&P and NASDAQ dropped 1.9% and 2.7%, respectively. On the bright side, meanwhile, gold hit a new all-time high. Because when in doubt, buy shiny things that won’t bankrupt your portfolio.

So what now? The Fed's next move just got trickier. Rate cuts might be on hold, even as parts of the economy show signs of slowing. And with consumer sentiment down and tariffs back in the headlines, the vibes aren’t exactly “economic optimism.”

The Takeaway? 

Your coffee might cost more, your stocks might go down, and Jerome Powell’s job just got even harder. But hey, at least it’s not finals week... yet.

Career Corner

Question

I'm having trouble with accounting questions about non-cash expenses and adding them back to 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 that 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, again, 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

Gold Stocks 

  • Gold and anything related to gold production, including mining companies, shot up last week. That’s not necessarily a great sign for the state of the country. Gold is generally a sleepy asset class. Gold stocks trade up so aggressively only when the level of collective fear is sky-high. People are clearly looking for safety.

W.R. Berkley (WRB) 7.5%

  • While not a gold stock, WRB deserves an honorable mention. Clearly, the insurance business is booming, based on the company’s latest updates. They recently appointed a new Executive Vice President, who’s coming in with new initiatives like Berkeley Embedded Solutions to increase revenue. On top of that, the company implemented a $67 million share buyback, which always keeps investors happy.  

What's Rotten

Lululemon (LULU) 14.2%

  • Beating earnings and still seeing your stock get crushed has to be a CEO’s worst nightmare. That’s exactly what happened to Lululemon. The issue was the company’s cautious guidance, which turned off investors who were already a little nervous about consumer spending and recession fears. CEO Calvin McDonald wants potential investors to be optimistic about the future, citing international expansion, particularly in China, and aiming to double sales by 2026.

Hims & Hers (HIMS) 8.7%

  • Is the ride almost over for HIMS? That’s what some investors might be thinking after the FDA announced that Ozempic knock-offs are no longer in short supply. That is very bad for HIMS, which is based on its business model supplying an active ingredient in these knock-offs. Now the FDA is saying, “Thanks, but we’re good now.” Either way, I’m sure it was a fun ride for stockholders through the years.

Thought Banana

Elon Musk’s Power Move 

Elon Musk is at it again, making headlines with a corporate shuffle that's got everyone talking. His artificial intelligence company, xAI, has acquired his social media platform, X (formerly known as Twitter), in an all-stock deal valuing X at $33 billion, including $12 billion in debt. 

This move aims to merge xAI's advanced AI capabilities with X's vast user base to create more intelligent and engaging experiences. ​

Musk, who purchased Twitter in 2022 for $44 billion, has been steering the platform through a series of transformations, including rebranding it as X. Despite some turbulence, this latest acquisition suggests he's doubling down on integrating AI into social media. 

The merger is expected to allow xAI to leverage X's extensive data and distribution channels, potentially revolutionizing how we interact online. ​

For college students glued to their screens, this could mean a more personalized and intuitive social media experience. Imagine AI-driven features that understand your preferences, curate content more effectively, and maybe even help you study (or at least recommend the best study memes).​

While some industry experts are skeptical about the merger's implications, it's clear that Musk is pushing the boundaries of technology and social interaction. 

As we scroll through our feeds, we'll be watching closely to see how this fusion of AI and social media unfolds. Whether it's a game-changer or just another headline, only time will tell.

Key Takeaway? 

Musk is consolidating his empire to accelerate the fusion of AI and digital interaction, pushing forward his vision of an all-in-one super app. Elon Musk’s AI startup, xAI, has merged with his social media platform X (formerly Twitter) in an all-stock deal, claiming a combined valuation of $113 billion. 

The move is intended to integrate xAI’s technology directly into X’s ecosystem, fueling Musk’s ambition to create a unified platform blending AI, communication, and commerce.

The Big Question: Will this AI-social media fusion create a better user experience, or just another over-engineered, ad-ridden algorithm that people hate?

Banana Brain Teaser

Previous

In a small snack shop, the average revenue was $400/day over a 10-day period. During this period, if the average daily revenue was $360 for the first 6 days, what was the average daily revenue for the last 4 days?

Answer: $460

Today

If y is the smallest positive integer such that 3,150 multiplied by I is the square of an integer, then y must be?

Send your guesses to [email protected]

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Only those who dare to fail greatly can achieve greatly.

Robert F. Kennedy

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Happy Investing,
Chris, Vyom, Ankit & Patrick