2025 Mid-Year Market Review: Stocks, Tariffs, AI & What’s Next

Hello and welcome back to the show. It is the 1st of July. So what we're going to do in this conversation is look back over the past 6 months and it has been a pretty sensational year. So quick, quick teaser here. On April 8th, the S&P 500 was off to one of its worst starts to a year in history, down 15% on the year. This was only in April. It's had one of its greatest ever comebacks, literally. It's now up around 6% year to date, which is above actually the average year at this or that place for this time of the year. And so what I wanted to do is unpack a little bit retrospectively why what has happened has happened. So I've got Piers, our co-founder, former trader, to talk us through with some charts, some heat maps. Going to get a lot of visuals here coming at you, and we're going to talk about some of the reasons and rationale We'll also talk about at the end, his view on a couple of things to look out for in the second half. Super important. And then also 3 star performers. 2 of them I can almost guarantee you're a user of, and 2 companies that are up over 50% so far year to date. So can you think of anything that you're using and they're up over 50% year to date? So we'll unpack those 2 star performers and also within that trio, of standouts, one country, and it's based in Europe. And for all the doom and gloom, this country is absolutely smashing it at the moment in a really positive way. So, that's what we're going to talk about over the course of the next half an hour or so. Before we begin though, can I ask just one simple favour? If you do enjoy the conversation, if you stick with us, can I just ask if you just give us a like, and subscribe to the channel. It's absolutely free. What we do here, we love talking about markets. We love unpacking it in a really educational way. The only thing I could ask for you is just like it, and then that really helps the algorithm to push out to more people than ever. But Piers, how are you and where do you want to start with the last 6 months?

Well, yeah, what an extraordinary year, or half year I should say. So, H1 has been put to bed at the market close last night, 30th of June, of course. So we are H1 done and we're into the second half of the year. So it's always a really good time just to kind of like just pause and like reflect, you know, where are we at? What has happened in the year? And you know, when I say we, you know, it's an important time for performance measurement, let's just say in markets based seats. And like, let's say if you're running, if you're a portfolio manager or whatever, you're running investments, then that half-year point, it's really important. That's what you're reporting to your clients. For example, stuff like your remuneration packages might be based on this kind of sort of quarterly or half-year and obviously full-year kind of performance. So a really important moment. And yeah, when you look at the S&P, it's up 6.2%. On the year, which as you said, well, if you take the sample of data from 1990 through to 2025, it's bang on average. It's literally ticked above the average line just by a whisker. So it's basically just an average year. It's just that we've had the mother of all sell-offs and the kind of one of the, as you said, one of the biggest rebounds we've ever, ever, ever seen. So yeah, look, very, very interesting. I'd say that the rollercoaster ride. I mean, as a recap, and look, if you don't know this stuff, then well, you're not, you're obviously not listening to the podcast often enough because we've been talking about it. But obviously that downside triggering off, well, you would say actually the high of the year was in Q1 was at the end of March and then we kind of moved into April and obviously it's mostly been about Trump 2025. And look, You know, his style breeds uncertainty because just not quite sure what he's going to do. It's kind of his forward guidance is kind of, well, there isn't any, and that's just his style. He does that on purpose. But it just means for markets, it's harder to really judge and predict what's going to happen. And obviously that's the game, that's the name of the game when you are investing, you're trying to predict where we're going next. So it can be tricky with Trump. But look, obviously his tariff policy has been front and center of certainly US markets and you'd say global markets this year. And the big sell-off was because of that on Liberation Day on 2nd of April when he threatened to kind of basically kill everyone with massive tariffs, sent markets into freefall. And it wasn't just the economic implications of what tariffs might bring. Obviously, making global trade, putting at risk a lot of global trade, right? Very protectionist policy. Some of the numbers threatening China with 145% tariffs. I mean, that's insane, right? So we went into a bit of a freefall, but the kind of secondary impact of tariffs that we were worried about fed into then inflation expectations rising because, right, tariffs, so that means prices going up, that's inflation. But hang on, We want the Fed to cut rates, but the Fed aren't going to be able to cut rates if inflation is going to be climbing. So you kind of had that kind of interwoven story triggered by the tariff uncertainty feeding into monetary policy expectations, just fueling our anxiety and concern that what had been a resilient economic situation in the US was at an end. US exceptionalism was over, massive rotation out of the US and into other territories, Europe, Japan, so on. So this kind of just triggered this big downside. And look, we fell 21% from the February 19th high down to the April 7th low. 21%, right? That is a, that's not just a correction, that's a bear market. So terminology there, if a market drops 10% from its recent peak, that's a correction. If it drops 20% plus, that's a bear market. So we did officially hit a bear market, which is quite extraordinary. It just then went and rallied 28% in everyone's face to make a new all-time high, including the final day of the quarter yesterday. New all-time highs, baby. And so yeah, the reversal's been because of an unwind of all of that, you know, the taco trade. And Trump has, all those threats have not materialized and, you know, negotiations are happening in the press today, you know, India, I think Japan, you know, trying to accelerate negotiations to get things done. And so, you know, tariff risk has gone away. So in the meantime, Look, inflation, we've had a couple of soft inflation reports out of US and Europe in fact. So that's encouraging people towards, well, hang on, maybe the Fed can cut twice or more even this year. You got Powell mess— sorry, you got Trump messing about with the kind of shadow Fed chair again, extending. Actually, we're now officially pricing in 3 cuts in 2025. So that's a change in the last couple of weeks. Really positive for markets of course. And look, the economy's nice and strong, you know, the labor market's holding up and so, you know, if we can If we can get trade deals negotiated, then you've got quite an interesting situation because we go into the second half of the year with actually, because what normally happens when markets have a really big rally like this, what normally happens, they carry on moving up. So yeah, I'd say I started H1. I don't think I've been as bearish for many, many, many, many years, maybe even a decade plus. At the start of this year, I was the most bearish I've been in many years.

Your bearishness was turning me on, as you'll know by our year-end calls we were making at the end of last year.

Yeah. I mean, go back and re-listen to that. I mean, I was like Armageddon.

Which is a rare thing.

Yeah. And I look, I like to think I was at least partially justified given that monster sell-off we had. But now here we are with the rebound. I start H2 and actually I'm thinking, pretty positive here, pretty bullish. And you know, I think this upside we've seen in the last couple of weeks, 28% through the roof. I mean, I think that's the direction of travel.

Also as well, just thinking then of what's to come the next 6 months. Yeah. There's further updates on trade tariff, the geopolitical situation in the Middle East, US debt refinancing, Powell's replacement, global interest rates and maybe AI developments. There are a few other fringe things, corporate earnings margins, China's economy, these sorts of things. Point I'm going to make is a lot of that is known, like a lot of the worst has been washed, come out in the wash already. And yet here we are.

Yeah.

And so when I try and think about potential speed bumps coming, I mean, obviously the refinancing thing is a big one, but There doesn't, it seems like a lot of the news has kind of come out and also run quite a far course. Yeah.

At this point in time, I think you've gotta be a bit careful because we've had such an unusual year where the uncertainties and the risks on the horizon, I mean, there were too many to count and it was really difficult to kind of see through any of them. And that's why sentiment really caved and we had the big sell-off, right? I think now that We're in a bit, I think we're back to a bit more normal. So, you know, what are the risks on the horizon? Well, there are some, but I think it's more of a normal situation. I think that last half year has been absolutely insane.

So again, to talk a more bullish picture, you by default saying this is normal and we're at record levels, but this is normal.

Yeah.

I like the sound of that.

Yeah.

I mean, they, they ask, because that means if this is normal, well then yes, there's risk to the downside, but there's also room for further upside.

Look, if the Fed cut 3 times as markets are pricing, look, I think that's looking pretty tasty. If you get the shadow Fed chair coming in, whoever Trump picks, right? If he picks Weller, who's bearish, or sorry, dovish, I should say. Well then currently we're pricing 2 cuts in 2026, right? That might increase depending on what happens with that Fed chair situation, which is, again, that's a bit of an unknown and an uncertainty. We've never really had that before, right? So that's going to play out. And look, If these negotiations can finish and we get good deals on trade, then there's no reason to think that economies can't kick on. I mean, obviously there's always risks. Obviously everyone's stopped talking about Nvidia and hang on, that's the litmus test for this AI revolution and how, and look, that was one of the catalysts for the rebound in Q2. It was actually Nvidia's earnings showed that revenue growth was still really strong. Showing that, you know, this AI revolution, despite the kind of little banana skins along the way, like Deepseek and so on. I mean, who remembers Deepseek? It's kind of like a distant memory, right? But so look, we gotta monitor the stuff like NVIDIA earnings and this kind of stuff. So obviously corporate earnings are key. But then look, if these deals get done, I mean, dare I say Trump could have played a little, an absolute blinder here. I'm just looking at the tax, sorry, tariff receipts from, for the US government, tariff receipts from US imports on a month-by-month basis. And basically in May they took in $22.2 billion in tariffs on imports, right? That's 4 times the amount they took in in May 2024. So we're looking like a, let's just call it a $15 billion plus kind of bonus on a month-to-month basis. And look, if Trump can land this where deals get done, because don't forget underlying there's a 10% tariff on the whole planet. Everyone's forgotten about that. Their tariff income is 4x, right? Everyone's forgotten. So if he lands it with a few deals here and there, China gets done, EU gets done, India gets done, Japan gets done, then he's going to pull it off where the finishing point is a place where people would've freaked out and panicked about at the start of the year. It's just that that finish point is nowhere near as bad as what those big threats were on Liberation Day.

So again, it all goes back to, he's literally written the template in a book.

Yeah.

And yet we go through this every week. You know, we're scratching our heads, we're overcomplicating it. It's interesting.

The thing is, a book is a book, right? But when you are on the joystick of the world's biggest economy and you are controlling it and you are rolling out your playbook that you've written in black and white text. You know, I think it's a whole different ballgame, right? I mean, yes, it's there, but the problem is, you know, I guess ultimately, did you trust that Trump could pull off the playbook? Could he actually execute? It's execution. Uncertainty, isn't it? We might have known what he was going to plan to do, but actually, can he pull it off? And politics is so polarized in the US particularly that I was actually reading one stat. I think they did a survey yesterday in the US about, right, who thinks the stock market's going to go up in the second half of the year? And I think amongst Republicans, I think 57% of them thought the markets would go up in the second half of the year. Bearing in mind, we've just had one of the biggest rallies of all time. 57% think more upside. Then polled the Democrats, just 17% of Democrats think that the market's going to go up, right? So it's so interesting.

But final question then, just on this segment. One is you made a good point there about AI and Deepseek, because I remember that Deepseek sell-off that day. Yeah. It's one of the biggest sell-offs we've had in memory, really. One of the things we had this week was I saw news that Zuckerberg is basically doubling down on AI or the position of the company in the AI space. And they're in advanced talks with a group of leading private credit investors. These are all the big guns who've had a really tricky year and I guess are looking to find creative means to utilize their cash. Apollo, KKR, Brookfield, Carlyle, these are like your household private equity firms. So it's super interesting there. So give it a number, Meta are looking to raise up to $29 billion in financing for its US-based AI data centre programme. So there was that big question mark as well, wasn't there, with the shakeout of is it going to slow these guys down? And evidently what we've seen with NVIDIA, we talked about last week, Meta is their key client amongst other big, big tech firms and they're still spending. But my question then, to wrap this part on the review side, Was, I was looking at a chart of the VIX. I just wanted to get your interpretation of when you look at something like the VIX, because the VIX is sat, and if you can see the video version of this conversation, I'll flash it on the screen because the VIX is at this level of 16. So the lowest close since February, mid-February of this year after that big spike that we had before. So just wanted to get a sense of How do you as investors, as a former trader, how do you interpret that? And is it one of those where you go, the VIX can, it's almost like a behavioral part where if it stays too low and too consistently low for so long, it's kind of ripe for an episode of volatility because almost us as humans look to create this sort of movement ourselves.

Yeah. I mean, the VIX, they obviously, they nickname it the fear gauge. So just for those who don't know, it's kind of, and I'm going to simplify here, but basically it's tracking the trade volumes for S&P 500 call options versus S&P 500 put options. And when you're buying puts, that's protection against the downside, right? A put option pays out and is profitable if the market falls. So if you are running a US stock portfolio and you're worried stocks are going to drop. Well, instead of selling all your stocks, which can carry tax implications, you can just buy put options, right? Which then if stocks do fall, well fine, your portfolio of stocks will lose value, but your put option position will make money offsetting that loss in the portfolio, right? So if you're buying puts, it's a signal that, well, you are worried about downside. So the, Calls are the opposite. Call options are profiting from market upside, right? So when you're looking at the ratio of the two, it's just quite an interesting gauge for, right, what's the feeling out there? What's the sentiment? And when there's more puts being bought than calls, well then that just means there's more people worried about the downside than are positive and bullish about the upside, right? And the more extreme that gets, well then the more extreme that kind of negative sentiment. And so when the VIX goes up, That's like fear. That's like, hang on, more puts are getting bought, more people are panicking, more people are buying protection. So yeah, we had a monster spike, hit 60 start of April, you know, as the S&P's, you know, going into bear market territory and, you know, very inverse correlation, right? Between the VIX and the S&P by definition almost. So look, it's now come back down and yeah, as you said, back to lows since Feb. S&P's back to the highs since Feb, right? So it's perfectly inversely correlated. But it's a good one to monitor. I'd be careful 'cause like when it gets back to 16, it's generally a pretty decent sort of technical support level if you want. But you can spend weeks and weeks and weeks and even months just flatlining at 16, right? The thing about if you want to trade the VIX, you can just use it as an indicator, right? But if you actually want to trade it, I mean, that thing's lethal. You, you, there's, I, there's no, out of every, any market that I've ever traded, the timing of your entry is the most important in the VIX than anything else. Just because when it moves, it moves like at the speed of light. And then if it spikes higher, right, it doesn't stay there for very long. And bang, you're savagely back down. So it's in and out, super short-term, timing's everything. And so yeah, it's a really difficult one to trade. But other than trading it, it's just that if you've never heard of it, look, it's just a good thing that people talk about, nicknamed the fear gauge, and yet inversely correlated to that S&P and just measuring sentiment really.

Okay, so we've talked about the top-level macro. Let's go down a layer and now let's look at a heat map which expresses the performance year to date from a visual perspective of how the different individual companies, but categorised in their sectors, has performed. So translating what you've described on the top level economic conditions, how does this translate then when you look at it on an equity sector perspective?

Yeah, well, when you're looking at a heat map like this, then the size of the boxes indicate the size of the company, right? So obviously that really big, the big tech The Mag Seven, let's say, stand out just visually as the ones your eyes immediately go towards just because they're the biggest boxes, they're the biggest companies. So, and you look at Apple is kind of the big outlier where, you know, we've just been talking S&P new all-time highs, right? NASDAQ new all-time highs. And yet actually year to date, Apple's down 16.7%. So, you know, and so there you've got to think about really two things. Firstly, tariffs. Now I know I've said, hang on, that tariff has gone away, but Apple are particularly vulnerable from their kind of supply chain perspective to, let's just say, a not particularly great trade deal with China, for example. Okay. And they're so massively reliant on that Chinese supply chain. That's not a thing you can fix in any short space of time, right? So that's been a really big drag. On Apple shares. The other one we talked about, Nvidia, the AI thing, the kind of just Apple have just not been, they're just not in the race. They haven't even bothered to try and join it, it seems. And that, I don't know, the longer it goes on, it's kind of, well, maybe that's just a very conscious strategy at a board level where, look, let's let the others mess about and try and figure out how to play and win this game. And I don't know, maybe they've got, I don't know, an acquisition strategy at some point. We haven't seen it, but maybe they've got an acquisition strategy to kind of just leapfrog, let's say, the first couple of years of this revolution and just kind of enter the market at a later stage with a big statement purchase. I don't know. Or They're just a big cash cow now. They're no longer a tech company. They're not an innovative company anymore. It's just a company that just spews out cash, pays big dividends, buys back $50 to $100 billion worth of shares every year. And maybe it's just that now. And it's, and it's, so I think Apple particularly stands out to me, then Tesla. Is one of the worst performers of the year, down 25%. So that's political and a function of the massive rally that Tesla had into the end of last year. And so from a timing point of view, and again, all because of the Trump-Musk kind of love affair, and that peaked in December. And then of course, Musk has been distracted firstly by running Doge, so he kind of stepped away from his other businesses to the detriment of those businesses. Obviously the love affair, the bromance has been busted. And so now Trump's threatening, oh, we're going to remove certain kind of concessions that Tesla gets. So obviously Tesla's an unusual case, but look outside of that, then you've got a lot of green on this screen. But yeah, some sectors a lot more than others. Of course, tech, financials have done incredibly well. That's one that stands out to me. Like JPMorgan's up 20%. This year, which is pretty tasty. So a lot of the financial sector have done particularly well.

Just to jump in there, why financials have done well?

Yeah, well, it's kind of, I guess, a function of really two things. I haven't thought about it in any detail, but the immediate things that jump to mind would be that, well, in the US at least, the economy has been really strong. So spending is still pretty rampant, right? So, you know, that's good for banks, but then, you know, lots of people, you know, maxing out their credit cards and paying interest on that. And then it's the interest side, right? Interest rates have not come down. Zero cuts in 2025. I know we're planning for 3 ahead, but there's been zero so far, right? So that then, that loan book sort of, situation benefits from higher rates as long as— that's a difficult one, right? It really benefits from higher rates if the economy doesn't collapse. Obviously if the economy collapses, well then, all right, that's going to be bad. So it's perfect for banks at the moment. High rates, resilient economy. So that's— and you are just now at the end of Q2, and it will be interesting to hear from their earnings reports. You're really starting to get deal flow. Coming through, right? There's been some IPO action. So finally that deal flow that we were thinking was going to be a 2025 story and wasn't, actually that's now really starting to show signs of some green shoots, as it were. So I think that's really helping on the bank side as well.

And that V-shape in equity volatility has obviously seen record-breaking revenues on their Trading division. Absolutely.

Exactly. Very good point.

Commodities, currencies, equities.

100%.

Yeah. So yeah, their outperformance perhaps a reflection of the fact of the breadth of their business. And as you said, firing on many fronts. So let's talk about a couple of these green spots. I mentioned there was 3 star performers of the past 6 months. We're going to talk about 2 stocks, 1 country. The first one is Netflix. So Netflix, you can see here, are up around 45%. In fact, if you look at a chart and I'll bring one up at Netflix's shares, they closed yesterday from when we were recording it around $45. They hit a low of sub-15 when they had the COVID kind of correction.

Yeah.

But I guess this is a COVID play. This is one of those like stimmy check everyone at home. And Netflix went through the roof and we're actually, we hit around just shy of 55, peak COVID went down sub 15, and here we are. We've actually kind of broken out in the last few weeks out of like a bit of a trading resistance level around the 42 area and we're now trading back to 45. And I just wanted to have a look at this. Now Netflix is the 4th best performing stock in the NASDAQ 100, because you just think outright tech a lot of the time. And I guess there's different ways to look at someone like Netflix, but they now boast a market value of $570 billion. That is bigger than ExxonMobil.

Yeah.

Netflix bigger than Mastercard. So yeah, this is a pretty phenomenal comeback. So what, yeah, what's under the bonnet here? What's fueling the appetite?

It's a really interesting one. Netflix, because they've kind of, it's kind of, again, it's a little bit like snuck under the radar. This thing. And maybe that's because it's not particularly, well, it's not really in the AI race particularly, so it's not really been talked about in that conversation. There's no tariff exposure, which is actually one of the good reasons, you know, so it hasn't been in the tariff conversation at all. And I actually think it's just well-executed I would say medium-term, uh, strategy that is now really starting to show up in their kind of numbers. And this is strategy that's been deployed now over the last, wow, 12 to 24 months, right? And it's really starting to come through. So stuff like, we've been talking about this down the years on this podcast, you know, stuff like cracking down on password sharing, for example. Or they've, you know, steadily been increasing their subscription rates. Okay. That's the thing, right? It's such a ch— I mean, wow. It's such a cheap service, you know, for what you get. It's quite extraordinarily cheap. So if you load up subscribers, load them up, load them up, load them up cheap, then you just tweak that little price point just to give it a little tweak from really low to still almost, still really low, but not quite. Yeah. People don't even blink. You don't know. People don't really look at this. And so I'll pay an extra $5 a month. But when you got, you know, I tell them what's their subscription numbers now, a couple hundred million or something. Yeah. When you, when you got $5 a month times by a couple hundred million, then actually, wow, that's starting to really translate into some big dollars, right? So that helps. Then they've, you know, really started to diversify with advertising and live events, I'd say, are the kind of two kind of new pieces to the jigsaw puzzle that, look, again, this is that long-term strategy. We've been talking about this for 2, 3 years, but now they've executed it and they've executed it well. So live events, especially in the sport side of things, NFL games, boxing, all the rest of it. But then they've had some big blockbuster series, Squid Game, Stranger Things, those bankers from previous seasons coming through with a new season, obviously with a banker like that also is a really positive thing, clearly. So all of these things have been kind of happening, but yes, it's all been a bit under the radar. And here we are kind of H1, you're just reviewing back and you look down the list of outperformers and there they are and you're like, wow, okay. Missed that one.

Squid Game. I know I've seen the adverts now. Squid Game 3. I didn't even finish Squid Game 2. I just watched the first maybe 2 or 3 episodes. I did watch 2. Did you get into it?

I did watch 2.

Did you finish it?

I did, but I know what you mean. It's not amazing.

I totally lost the momentum.

I probably won't watch 3. Actually, now we're talking about this. You know, I said, you know, where did that come from? Missed that one. I think I'm right in saying in our year-end episode, 6 months ago, pretty sure I had Netflix on my list as ones to watch for 2025. I'm going to have to re-listen.

Oh, you're making that up. That episode doesn't exist. I can edit stuff.

Can we have listeners go back, go back and listen to that end of December show and comment in the notes, did I pick Netflix? Or am I just dreaming?

I think the heat, if you're living in London, it's a, it's very hot at the moment. It's gone to his head. Anyway, let's move, let's move on and let's talk about the other company. And as I mentioned, you're probably a Netflix subscriber, but you might also have at least once, or the app certainly sits on your phone, whether used or not, is Uber. And Uber shares are up Over 50%, they're actually outperforming Netflix, if you like. And I just thought this was an interesting one because everything I remember reading in the media maybe 12, 18 months ago was super negative on Uber. And it seems to have been pretty negative from the onset, to be quite honest, after that initial launching when they were listed. So what's happened at Uber?

Yeah.

That's allowed them to really turn the ship around and actually now become quite a firm favorite on the street.

Well, I think one key thing then, well, why were people worried about Uber? And it was really the, I guess you could call it the Elon Musk risk, the kind of robo taxi, you know, who needs Ubers when you got Tesla robo taxis knocking about everywhere, right? So that was kind of a risk. I think two things have happened there. A, Tesla have not had a very good year. Musk's eye is off the ball perhaps. But then also Uber have just quietly and steadily been entering that game. And I think the AV, the autonomous vehicle sort of situation, they're bang in it, but they're actually doing it slightly differently where they're partnering up with other big, well-established global automotive firms like Volkswagen, for example. But they've actually got 18 different partnerships And they call them AV partners, right? Autonomous vehicle partners. And this is a lot to do with those big kind of incumbent automotives basically buying Uber's data in a way, right? It's their kind of all that data that they've been harvesting from their whatever millions of rides there are per day. You know, that's great data. That's a great dataset to kind of train models.

Feels good. Feels quite reminiscent of Reddit and how they're monetizing the Reddit model by just being this unorganized, massive treasure trove of information that you could just plug in then these tech firms to utilize the datasets. And it also almost feels like another worry then for Tesla in a sense of closing that competitive edge that they've always had with their dataset.

Yeah, it does. I mean, for, yeah, for sure. Although I read one stat which kind of blew my mind here, which is an amazing thing if you're long Uber and you want more bullish upside sort of ideas, you want to stay in this stock, but also then for competitors and rivals. So the stat was that Uber, this is about their So just 5% of the adult population in its operating regions is on the Uber platform, just 5%, which means, wow, they've got huge growth potential within those operating regions. They themselves, but also just indicates, well, there's still a monster market out there that hasn't been captured yet. And so, you know, in automotive, oh sorry, autonomous vehicle game, then I think that's probably just going to be room for a few players rather than just one coming in and landing the entire market.

Yeah. And I almost think as well, when you have a really precious data set like that they have with the deep data on autonomous vehicle-wise, okay, the movement traffic and data from the car itself, but from a user's habits, perspective, you know, cross-referencing geographic location, where are they going, who are they visiting, how often, how frequently. There's almost like the ability to monetize inbound, to advertise on the platform from a consumer's perspective, and then outbound, pushing it out to big tech. So you've got money coming in on both ends of the data spectrum.

That's their moat. It's a huge one. Yeah. They're the kings of that. And look, the final piece is advertising. Yeah, a bit like Netflix, right? Once you've got a platform and you've been successful in terms of attracting hundreds of millions of people to it, well then you can just monetize it in lots of different ways. And so actually their advertising revenue just from off the kind of app is actually really starting to show up in a meaningful way in their numbers. So that's That's obviously part of the story as well.

Okay, cool. Well, look, to conclude, let's talk about our final standout and it's a European country. So have you guessed it yet? It is, bom, bom, bom, Italy. So Italy, why are we talking about Italy this week?

We're talking about Italy this week specifically because their bond yields They're just going down big time. And we, look, you've got to be of a certain age maybe to understand the significance of this. If you were around and kind of conscious of financial markets back in, well, specifically 2010, 2011, 2012, if you were around then, well, you'll know that Italy literally Nearly went bankrupt, literally nearly like full-on default, literally nearly—

Tell the exit.

Yeah. Yeah. Literally nearly crashed the entire Eurozone project. That was measured by a few different things, but the absolute kind of litmus was the 10-year bond yield, right? So we look at the 10-year bond yield as a, right, it's a It's many things, but it's a creditworthiness measure. Okay. And as that bond yield rises, well, that's people selling those bonds, means the yields rise. And when you're in panic mode, oh my God, they're going to default, get me out of this. Then bond yields just spike. And actually their yield, I think spiked to about 35%. Okay. Back in like 20, start of 2012, 35%. So that's def— yeah, that's like the market saying game over. Now we look at, so that's one thing. You just look at their yield individually. Yeah, go on. Sorry, you need to take yourself off mute first.

Was that Greece? Sorry.

Oh, was that Greece?

Or was that Italy?

Oh, sorry, you're right. I'm, my colorblindness is letting me down here. That was Greece.

Is that what you're pinning it on? Colorblind.

Yeah, absolutely. There's always an excuse. Yeah. But actually the chart we're looking at, I was going to say you can look at the, just the outright bond yield, but what's more insightful perhaps is looking at what's called the spread, the spread between one bond yield and another. And when you start looking at the spread between a bond yield from a country where there's default risk versus a bond yield from a country that's super safe and stable, then that's your ultimate measure, right? So we look at Italy versus Germany. Or Greece versus Germany or whoever it is, Germany being that kind of ultimate barometer.

And just to put this into some further perspective, when we talk about the pigs, so the pigs being those in focus potentially bailout nations back in a few years ago, actually even those themselves are in almost two sides. There's the major kind of financial power centers or economic engines of Europe. So Italy, Spain against Germany, France, and then there's the periphery, which they're often termed as, which would be the Greece to Portugal. And so the reason why Italy was so, yeah, and Ireland, the reason, so it was almost like Greece, Ireland, Portugal, their yields are way higher, whereas Italy was like the sore spot of the more core ones, if you like, wasn't it?

But PIIGS wasn't that, it was double I. Wasn't it Portugal, Italy, Ireland, Greece, Spain was the acronym. But look, that was back then, you know, Eurozone debt crisis. Okay. These lot literally nearly kind of vanished and sank into the Mediterranean.

Quick shout out to Ireland, by the way. Yeah. I mean, look at that chart. Ireland, what a thing of beauty.

It's extraordinary. And all of them now, 'cause you go far right of that chart and look, they've all converged what looks like on this scale, at least they've all converged back to the same, right? We kind of almost need another chart, which kind of zooms in on the right here, because there is some differential. But the key thing, one notable thing that's happened is the Italy-Germany 10-year spread has dropped below 1%. That's the headline news and it's dropped below 1%, you know, for the first time since pre-eurozone debt crisis. And it's because Italy have just been, They've been really well managed and stuff's going in the right direction. Well managed by Giorgia Meloni, right? And she has come in as the Prime Minister sort of post-COVID, came in on a, oh, she came in in 2022, didn't she? On a bit of a sort of anti-establishment platform. It's just that actually the way she's gone about business has been really pragmatic and actually just no nonsense and actually no sort of extremist policies getting implemented either. It's just solid to business. Let's go. And it's all been very market friendly. So the concerns around Italy's deficit, and obviously post-COVID, all deficits widened because governments stepped in with huge fiscal stimulus programs, right? And so actually when you look at the Italian deficit, it dropped, it got to about, well, over 9%. Debt-to-GDP ratio. Okay. Then Meloni came in in 2022. It was still over 8% at that point, and people were worried, hang on, some of her policy's going to cut tax, she's going to raise spending, the deficit's going to balloon, there'll be ill discipline, and this thing's going to get worse and worse. Right? The opposite's happened. You know what their deficit is now? It's back to 3.5%. It was over 8% when she came into office, and this has been a stellar performance. So that just means just from a straight out fiscal sustainability point of view, if you want, debt default risk has dropped dramatically. And finally, it feels like, you know, Italy's such a fractious country when it comes to politics, but she's just shut them all down. And like, I would put her like top 5 best performing politicians of the last few years. She's right in there. So And then you're getting quietly stuff just start to happen from a strategy execution point of view, like trying to tighten up on tax evasion, which has been a particular problem for Italy and actually peripheral Europe generally for many generations. And of course that's bad news for tax receipts, right? So cracking down on tax evasion. Also the economy's been doing well. It's, you know, all this kind of stuff attracts in foreign investors. There's more risk appetite towards Italy 'cause people are less concerned about that fiscal trajectory, right? So more investment comes in that benefits the economy. They've had things like VAT, sales tax receipts have been way higher than people were forecasting when she came into office, right? And so this has all helped to feed into that deficit reduction. The S&P ratings agency have upgraded their debt rating, right? So whilst we talk about countries like the US and we're really concerned about debt sustainability, Italy are the opposite right now. And look, you've got rate cuts in, in from the ECB just helping in, in the mix, right? And actually the final point here, the finance ministry this week announced they've got so much excess cash from tax receipts, they're buying back €5 billion of debt. They're actively going out and reducing their debt by €5 billion. Because they can, they got more cash than they thought they'd had.

So interesting. And do you think as well, there's a degree of benefiting from, I always feel like in Europe, the nature, you call it the Eurozone project of, they like almost pass this political hot potato amongst them. And it seems like there's never at one point, I guess the sovereign crisis being one of those, but generally speaking outside of that, there's normally one of them in political disarray.

Yeah.

And it felt like a few months ago that was France and Macron. Yeah. And actually Italy's kind of just gone away and then Trump has gone us against them. Yeah. And that's almost unified Europe.

I definitely think—

So has that helped?

Yeah. I think it's an unintended consequence of Trump's sort of, you know, you know, just getting in amongst it all and, Yeah, he's just brought Europe together, particularly around stuff like defense spending. Okay. So yeah, they're more unified. And so you've got this situation that's just a bit more political stability. And actually I'm looking down the stock market's returns on the year to date from the first half of the— and it's not just Italy. Italy are up like 18% year to date, but actually Spain, their stock market, at least their stock market's up 28%. Even Germany, I mean, they're up 30%.

Wow.

Didn't see that one there. Oh, so that's year over year. Sorry. So the 19%, I should say year to date for Germany. So actually Spain are 20%, apologies, year to date, 20%, Spain, Italy, 15%. So look, all these economies are actually really showing up and it's been part of that rotation out of the US that's kind of fueled a lot of that. Upside, which has led to some of that dollar weakness just because you got that asset rotation going on. But yeah, Europe is in a better place and particularly the likes of Italy, you know, the old pigs, you know, they're the ones that are on fire.

And also just to give one more hat tip to Meloni in Italy is that she's also played Trump really well.

I agree.

Given her, what she campaigned on, like you said, obviously aligns somewhat with him, but yeah, here's what he, he, they met in April, I think for the first time. And I had just had it highlighted here. He described her as the chosen one. He described her as a real live wire and someone he could work with to straighten out the world a little bit. So she's literally got this all figured out, it would seem.

Yeah. Yep. Take note. She's the, in fact, I'm gonna upgrade her. I said she's in the top 5. I'm gonna put her as politician of the year so far.

So far. We're only halfway through.

Let's revisit that table come year end.

Yeah. And no political views intended here. This is just on the performance.

Absolutely.

Of our analysis.

Yeah. Looking at the economy and markets. Yeah.

Yes.

She smashed it.

All right. On that note, thank you very much everyone for listening. Please do drop us a comment. Let us know what you think about Uber, about Netflix. Is this it? More to go or not? Or if you've got a view about equities or the VIX or Italy, drop us a comment. Let us know. Love to get your thoughts. Piers, see you next week.

See you later.