Silver banana goes to…

In this issue of the peel:

• 🛒 Walmart is hiking prices on everything from bananas to basics, blaming it on tariff pressure.

• 🏥 UnitedHealth shares tanked nearly 11% as the DOJ launched a criminal probe into potential Medicare fraud.

• 🚗 The world’s third-largest economy shrank 0.2% in Q1—Japan’s first contraction in a year.

Banana Bits

• Japan’s economy contracts 0.2% in Q1 2025, marking its first decline in a year amid global trade tensions.

• Trump’s meme coin dinner draws criticism, raising ethical concerns over the blending of politics and cr*ptocurrency ventures.

• First-time homebuyers struggle, as high mortgage rates and prices deter entry into the housing market, impacting builders.

• Gold prices fall to a one-month low, influenced by easing U.S.-China trade tensions and reduced safe-haven demand.

• Trump’s Middle East tour yields major deals with Qatar buying 210 Boeing jets, and Saudi Aramco signs $90B worth of U.S. agreements.

• Walmart warns tariffs on Chinese goods will drive up prices, impacting consumer costs and supply chain dynamics.

The Daily Poll

Previous Poll:

What’s your take on Qatar’s Boeing investment + plane order?

Power move: 24.2% // PR stunt: 33.7% // Win-win: 25.3% // Meh: 16.8%

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Macro Monkey Says

Powell’s Pivot: From “Let It Run” to “Let’s Rethink”

The Federal Reserve is taking a long, hard look in the mirror—and not just about when to cut rates. Chair Jerome Powell has launched a full-scale review of the Fed’s monetary policy “framework,” its strategic blueprint for hitting its dual mandate: stable prices and maximum employment. 

Since 2012, this framework has helped guide rate-setting decisions through economic ups and downs, but the post-pandemic environment has upended many of its foundational assumptions.

Back in 2012, the Fed formally adopted a 2% inflation target to anchor expectations. But in the ultra-low rate world that followed the 2007–09 recession, policymakers grew concerned that monetary stimulus might lack potency in downturns—after all, you can only cut rates so far. 

So the Fed’s 2020 review introduced a flexible average inflation targeting regime, essentially saying: “Let inflation run hot for a bit to make up for the cold years.”

Then came COVID-19, lockdowns, fiscal firehoses, and the biggest inflation surge in 40 years. Powell now admits that the framework, designed for the disinflationary calm of the 2010s, isn’t built for an economy that may be entering a period of persistent supply shocks and structurally higher real interest rates.

At a research conference at the central bank’s headquarters in Washington, Powell stated, “We may be entering a period of more frequent, and potentially more persistent, supply shocks—a difficult challenge for the economy and for central banks.” 

This review, expected to conclude by August or September in 2025, aims to ensure the Fed's strategy remains robust in the face of evolving economic challenges. While the core principles, such as the 2% inflation target, will likely remain, the Fed is considering adjustments to manage public inflation expectations better and maintain economic stability.

The Takeaway?

The Fed is rethinking how it does its job. After COVID, rate hikes, and persistent inflation, Jerome Powell is overhauling the Fed’s 2020 playbook. Expect a new framework later this year—one built for a world of supply shocks, inflation volatility, and higher real interest rates.

What's Ripe

Steris (STE) 8.5% 

• Steris shares surged 8.5% following the release of its fiscal Q4’25 earnings, which exceeded analyst expectations. The medical equipment provider reported robust revenue growth and improved margins, driven by increased demand for its sterilization and surgical products. This performance underscores Steris's resilience and adaptability in a competitive healthcare market.

Dollar General (DG) 6.0%

• Dollar General’s stock rose 6% after Evercore ISI added the retailer to its Outperform Tactical and Action Positioning Call List. The investment firm cited early signs of a successful turnaround, highlighting improved fundamentals and operational progress. 

• With a renewed “back to basics” focus and better internal processes, Evercore sees the potential for a possible earnings beat when Dollar General reports Q1 results on June 3, fueling investor optimism around the stock.

What's Rotten

UnitedHealth Group (UNH) 10.9%

• UnitedHealth Group shares plummeted 10.9% amid news of a criminal investigation by the U.S. Department of Justice into potential Medicare fraud. 

• The probe adds to the company's recent challenges, including the abrupt resignation of CEO Andrew Witty and the suspension of its 2025 financial forecast due to rising medical costs. These developments have significantly impacted investor confidence.

Reddit (RDDT) 9.4%

• Reddit's stock fell 9.4% to $113.59, marking a significant decline following the 9.2% jump on Wednesday, fueled by the company's strong first-quarter earnings and positive outlook. 

• Despite a 71% year-over-year revenue increase to $427.7 million and net income of $71 million, daily active users reached 101.7 million, falling short of the 103.1 million that analysts anticipated. 

• The company attributed this shortfall to changes in Google's search algorithm, which affected user traffic. Investors are concerned about Reddit's reliance on Google for user acquisition and the platform's ability to sustain growth amid these challenges.

Thought Banana

Walmart’s Price Hike—When Even Bananas Cost More

Walmart, the retail titan that serves approximately 90% of American households, has announced plans to raise prices on various products due to the impact of tariffs. 

Chief Financial Officer John David Rainey described the magnitude and speed of these cost increases as "unprecedented." While Walmart experienced stronger-than-expected sales for the quarter ending April 30, boosted by value-seeking consumers, it refrained from issuing a profit forecast due to uncertainties around absorbing tariff costs. 

The company's decision to increase prices is a significant development, as it may signal a broader wave of price hikes across various industries. 

Economists anticipate that consumer-price inflation could rise from 2.3% to approximately 3.3% over the next year if tariffs persist. While some of President Trump's trade tariffs have been rolled back, those still in place, especially on Chinese goods, are starting to strain importers. 

Walmart's move underscores the broader economic ramifications of ongoing trade policies. Other companies, including Ford and various fashion brands, also plan to raise prices, with Ford citing up to $5,000 in tariffs per vehicle. 

The U.S. economy has been at a low inflation rate for four years, but expectations are rising. The Federal Reserve has noted growing inflation concerns among consumers and manufacturers. 

As businesses face higher import costs due to both tariffs and a weaker dollar, selective price adjustments are being implemented to maintain profitability, reflecting challenges in a low-margin retail environment. 

The Takeaway?

Walmart's decision to raise prices due to tariffs signals a potential wave of cost increases across industries. As the largest U.S. retailer adjusts its pricing strategy, consumers may face higher costs on everyday items, highlighting the broader economic impact of ongoing trade policies.

The Big Question: How long can companies like Walmart protect their margins before passing the pain on to your shopping cart?

Banana Brain Teaser

Previous

Set X consists of 8 consecutive integers. Set Y consists of all the integers that result from adding 4 to each of the integers in set X and all the integers that result from subtracting 4 from each of the integers in Set X. How many more integers are there in set Y than in set X?

Answer: 8

Today

If 65% of a certain firm’s employees are full-time and if there are 5,100 more full-time employees than part-time employees, how many employees does the firm have?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
Chris, Vyom, Ankit, Mithun & Patrick

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