Weekly Report 42/2025

Many headlines last week

A week full of headlines began with Prime Minister Sébastien Lecornu resigning in Paris, only to be reappointed shortly afterwards. In Washington, the shutdown meant that a lot of economic data was missing. For example, labor market statistics weren’t published. But private data suggests that the job market is stagnating. That’s not all. In the US, a classic immigration country, net immigration is negative for the first time ever.

The first consequences of this are already becoming apparent: demand for housing is declining, consumption is stagnating, agricultural harvests are becoming more expensive, and the remaining workforce is becoming more expensive. Doubts are arising about the resilience of the economy. Whereas gross domestic product in the US used to grow by 3% annually, a third of this growth could be attributed to immigration. As a result, many economists have recently reduced the growth potential to 2% per year.

The headlines surrounding the US automotive supplier First Brands, which went bankrupt with liabilities of more than $10 billion, were also negative. Numerous banks and rating agencies failed to detect the off-balance-sheet financing practices that had been built up over many years. Anyone who really believes that a windshield wiper manufacturer in a stagnant industry can successfully manage a supply chain financing program with a 17% return must be naive. ‘Such an extraordinarily high interest rate should have been a clear warning sign of the borrower’s financial distress’, sums up the New York Times.

The ceasefire in the two-year Gaza war reduced the risk premium on oil. In addition, a considerable oversupply is still expected on the market. At $58 per barrel of crude oil, the price fell to a level last seen in spring 2021.

However, the biggest impact last week came from stricter export rules for rare earths decided in Beijing. Over decades, China has secured around 90% of the world’s capacity. Without these critical raw materials, neither wind turbines nor weapons, semiconductors nor cars can be manufactured. Now the alarm bells are ringing in the West, which has relied on perpetually functioning supply chains during decades of boundless globalization. Donald Trump responded by saying that he would impose ‘massive’ (additional) tariffs on Chinese goods. He sees ‘no reason’ for a summit meeting with Xi Jinping. However, the higher tariffs have long since lost their scare factor for China.

Overall, the SMI remained largely unchanged (-0.2% last week), but the US stock markets fell significantly (-2.5%). Our most risky portfolios survived the past week with a slight decline (-0.3%) and proved to be significantly more stable than the global stock index (-2.1%), which is dominated by US stocks.