Crude Inventories Fall by 3.6 Million Barrels; WTI Oil Tests Multi-Week Highs

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The latest Weekly Petroleum Status Report released by the EIA on June 11, 2025, brings fresh insights into the oil market. With crude inventories dropping by 3.6 million barrels in a single week – far exceeding analyst expectations – the report highlights important shifts impacting domestic production, strategic reserves, and key pricing levels for WTI and Brent oil.

Overview of the EIA Report

The report revealed several noteworthy trends:

Crude Inventories: A significant decline of 3.6 million barrels was recorded compared to the previous week, with current levels now approximately 8% below the five-year average.
Previous Week Comparison: Last week witnessed a decrease of 4.3 million barrels, emphasizing the consistent downward pressure in crude stockpiles.
Gasoline & Distillate Supplies: Total motor gasoline inventories increased by 1.5 million barrels versus an analyst forecast of a decrease of 0.9 million barrels. Similarly, distillate fuel inventories climbed by 1.2 million barrels.

Figure: Latest chart illustrating the decline in crude inventories and subsequent market reaction.

Key Market Insights

Production and Imports

Domestic Oil Production: There was a modest increase in domestic production from 13.408 million barrels per day (bpd) to 13.428 million bpd. This slight recovery underscores efforts to rebound from the recent pullback triggered by low oil prices.
Crude Oil Imports: Imports dropped by 170,000 bpd, holding an average of 6.2 million bpd over the past four weeks, suggesting a tighter supply mix in the global market.
Strategic Petroleum Reserve: The reserve saw a small uptick from 401.8 million barrels to 402.1 million barrels as the U.S. continued purchasing oil to bolster its strategic stockpile.

Price Movements and Market Reaction

WTI Oil: Traders pushed WTI oil to test levels above $66.50 as it reacted swiftly to the EIA data.
Brent Oil: Similarly, Brent oil found support above the $68.00 level following the report’s release, indicating that market participants are readying for a potential rebound amid the inventory draw.

The report itself, with such significant changes, has spurred a broader market dialogue not only about immediate inventory concerns but also about long-term production recovery and strategic planning in a volatile global environment.

Implications for the Oil Market

The reported figures suggest a few important implications:

Supply-Demand Balance: The sharp drop in crude inventories can signal tighter supply, potentially leading to higher prices if demand remains robust.
Market Confidence: The increase in strategic reserves and the marginal rise in production might reflect a cautious rebound strategy, aligning with broader expectations regarding a slow yet steady recovery.
Trader Sentiment: With target levels for both WTI and Brent oil being tested, traders and investors could be adjusting their strategies based on renewed optimism and reaction to policy signals – including trade developments between the U.S. and China.

Conclusion

The EIA’s latest report paints a detailed picture of a dynamic oil market facing both challenges and opportunities. The precipitous drop in crude inventories, the modest rise in domestic production, and the subtle shifts in gasoline and distillate supplies all converge to create a market environment that is cautiously optimistic. As traders react to these changes and adjust their positions in anticipation of further developments, keeping an eye on the economic calendar and market trends will be crucial.

Tags: #OilMarket #EnergyReports #CrudeOil #EconomicNews

U.S. Inflation Cools in May: Energy and Core Prices Fall, Supporting a Dovish Fed Stance

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U.S. inflation took a softer turn in May as the latest Consumer Price Index (CPI) data revealed only a modest 0.1% month-over-month increase—even below forecasts. This subdued inflation print, paired with weaker energy and select core goods prices, has bolstered expectations of a more dovish stance from the Federal Reserve. In this post, we dive into the key data points, examine the contributing factors, and explore what this means for the markets in the weeks ahead.

U.S. CPI: Slower Price Growth

Despite enduring trade tensions and tariffs, U.S. consumer inflation registered a mere 0.1% increase in May compared to the expected 0.2%. On an annual basis, inflation remains steady at 2.4%. This slight underperformance suggests that price pressures are easing, which could have significant implications for monetary policy.

Figure: The CPI Rollercoaster – A visual representation of the moderated U.S. inflation trend.

Core CPI: Impact of Declining Vehicle and Apparel Prices

Core CPI, which excludes food and energy prices, also rose by only 0.1% in May—considerably lower than the anticipated 0.3% rise. A closer look at the numbers shows that prices in sectors particularly sensitive to tariffs, such as vehicles and apparel, actually declined. Used cars and trucks fell 0.5%, new vehicles slid 0.3%, and apparel dropped by 0.4%. These reductions helped to offset modest increases in other areas like medical care and shelter, ultimately keeping the overall core inflation figures subdued.

Energy Index: A Soft Landing for Gasoline and Natural Gas

Energy prices have been a significant drag on headline inflation. In May, the energy index dropped by 1.0%. Gasoline prices plunged by 2.6%, while natural gas prices went down by 1.0%. Over the past year, energy prices have declined by 3.5% overall—as gasoline prices have fallen sharply. Although electricity prices bucked the trend with a 0.9% increase in May and a 4.5% rise year-over-year, the overall softness in energy costs may help temper broader inflation expectations.

Food and Shelter: Mixed Signals in the CPI Basket

The food index experienced a 0.3% rise in May, recovering from a minor decline the previous month. Both grocery store and restaurant prices grew modestly, with full-service and limited-service meals moving in tandem. Meanwhile, shelter costs provided consistent upward pressure, rising 0.3% in May and 3.9% over the past year. While shelter holds a large share of the CPI basket, its gradual climb is being offset by the easing pressures seen in other areas.

Fed Outlook and Market Impact

The tepid core CPI report underlines the Federal Reserve’s cautious approach to changing interest rates. With tariffs not yet pushing prices upward significantly, Fed officials are likely to maintain a data-dependent and restrained policy stance. Market participants are now eyeing support for U.S. Treasuries, as softer inflation tends to drive yields lower. Meanwhile, the dollar is expected to remain range-bound in the near term, and equity markets could benefit from sustained consumer spending with limited cost pressures.

Conclusion

May’s inflation report paints a picture of moderated price pressures across several key sectors. With both headline and core CPI figures coming in below forecasts, concerns about runaway inflation appear to be easing. Although shelter prices continue their steady climb, declines in energy costs and sectors sensitive to tariffs provide room for a more dovish Fed stance. As the market processes these developments, traders can expect continued support for bonds and a stable outlook for the dollar in the coming months.

Tags: #Inflation #Fed #EconomicUpdate #CPI #EnergyPrices

US-China Trade Talks Resume as Markets Eye Rare Earth Mineral and Tech Restrictions

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In a renewed effort to ease escalating trade tensions, US and Chinese officials reconvened for critical talks in London. With a mix of cautious optimism and unresolved disputes, the discussions center on sensitive issues such as technology restrictions and rare earth mineral exports. This blog post dives into the key points of the negotiations, expert opinions, and the potential market implications as both nations navigate an increasingly complex economic landscape.

Key Points

US-China trade talks have restarted in London, with a special focus on tech restrictions and the export of rare earth minerals.
China recently offered export permits for rare earth minerals to US firms, sparking hopes for progress.
With a 40% drop in China’s exports to the US so far this year, the urgency for a lasting resolution has grown.

US-China Trade Talks Take Center Stage

On Monday, June 9, high-level officials from both sides met in London to resume discussions that began amid a fierce trade war marked by tariffs and counter-tariffs. The previous 90-day truce, although a temporary pause, allowed the parties to open dialogue. Yet, accusations of truce breaches from both sides added tension to the proceedings.

Two main topics dominated the agenda:

Rare Earth Mineral Exports: Amid growing concerns, China extended an olive branch by granting export permits to US auto suppliers in a bid to ease the strained relationship.
Tech and Semiconductor Restrictions: With disputes over restrictions on semiconductors and other AI-related technology, both sides are under pressure to reach a mutual compromise.

Key participants included US Treasury Secretary Scott Bessent, US Trade Representative Jamieson Greer, US Secretary of Commerce Howard Lutnick, along with their Chinese counterparts such as Vice Premier He Lifeng and Commerce Minister Wang Wentao. The six-hour meeting is scheduled to continue on Tuesday, June 10.

“Absolutely expecting progress from US-China talks. US-China meeting today to be short, but bear results. Expecting China to release minerals US needs US to release export controls if China talks go well.” – US National Economic Council Director Hassett

Economists Skeptical About a Deal

Despite the diplomatic gestures and a temporary truce, some economists remain unconvinced. Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, stated:

“While a temporary truce on export controls might be reached, a meaningful agreement remains unlikely.”

This skepticism reflects the complex dynamics and deep-rooted economic differences that continue to underpin the negotiations.

Economic Divergence Concerns Mount

Apart from the trade talks, growing economic divergence between the two giants has attracted significant attention. While China battles persistent deflationary pressures, the US faces creeping inflation—a contrast that complicates efforts to strike a balanced deal.

On June 9, inflation data from China revealed that consumer prices fell by 0.1% year-on-year, matching April’s figures, and producer prices dropped by 3.3% after a 2.7% decline in the previous month.

“China – PPI pulls inflation down further. CPI was surprisingly firm in May, with core continuing to show a reversal from the deflation of 2024. Overall, however, normal indicators remain very weak. Leads for core have started to deteriorate again, and PPI deflation accelerated in May. The GDP deflator will be negative once again in Q2.” – East Asia Econ

Furthermore, trade data painted a stark picture: exports from China to the US have plummeted by 40% this year, clearly underscoring how tariffs and trade policy have reshaped market practices.

Markets Eye London as Trade Deal Uncertainty Lingers

On Tuesday, June 10, early trading in Hong Kong and Mainland China showed only a modest reaction to the overnight updates in trade negotiations. The CSI 300 and Shanghai Composite Index in Mainland China recorded small gains, while the Hang Seng Index in Hong Kong edged up by 0.18%.

However, despite ongoing US restrictions targeting China’s technological advancements, the US “Magnificent 7” tech stocks have continued to underperform relative to China’s rising tech sector. For instance, the Roundhill China Dragons ETF has surged 21.91% year-to-date, while its US counterpart, the Roundhill Magnificent Seven ETF, is down by 2.11%.

US-China trade talks in London – a critical moment to ease tensions and reset trade agreements

China’s Technological Momentum

Amid these high-stakes negotiations, market watchers are also keeping a close eye on the tech sector. China’s ability to push ahead technologically—despite US restrictions on AI and semiconductor exports—is being highlighted by contrasting market performances and industry trends.

Daily chart showing China Tech Stocks vs. US Magnificent 7 – Daily Chart – 100625

Outlook

As the talks enter their second day, the potential for a comprehensive trade agreement remains uncertain. Should both nations succeed in easing restrictions on technology and rare earth exports, it could pave the way for broad-based market gains. Conversely, a breakdown in negotiations may prompt investors to seek safer alternatives, thereby impacting regional stock markets.

The unfolding dialogue between Washington and Beijing is certain to have far-reaching implications across global financial markets. Stay tuned as the conversation evolves and as markets absorb these critical developments.

Conclusion

The resumed US-China trade talks illustrate the delicate balancing act both nations face—managing fierce economic divergence while attempting to negotiate terms that will ultimately benefit both sides. While recent gestures have injected a measure of optimism into the proceedings, key challenges remain that could determine whether a lasting agreement is within reach.

Tags: #USChina #TradeTalks #RareEarth #TechRestrictions

GameStop Drops as Q1 Sales Miss Offsets Earnings Beat

News

GameStop Corporation’s latest quarterly report has sparked renewed market debate. Despite beating earnings expectations, the video game retailer’s revenue came in far below analyst forecasts—triggering a sharp after-hours slide in its stock price. In this post, we explore the key results of Q1, the impact of a steep revenue decline on market sentiment, and the mixed outlook given the company’s ongoing digital pivot.

Revenue Miss Triggers After-Hours Slide

GameStop shares fell more than 4% in after-hours trading following the release of its mixed first-quarter results. Key details include:

Revenue Drop: Annual revenue dropped 17% to $732.4 million, well short of analyst projections of $754.2 million.
After-Hours Impact: Trading volume reached 2.4 million shares, with the stock closing at $28.65—a fall of $1.50 or about 4.98%.
Market Concerns: Despite posting adjusted earnings of $0.17 per share (far exceeding the forecasted $0.04), the weaker top-line performance has raised concerns over the sustainability of its core retail operations.

After-hours trading image depicting GameStop’s share price decline.

Earnings Surprise Versus Steep Revenue Decline

While the earnings beat marks GameStop’s fourth consecutive profitable quarter, the stark contrast between robust adjusted earnings and the significant revenue miss paints a challenging picture:

Earnings Beat: Adjusted earnings reached $0.17 per share compared to the Wall Street forecast of $0.04.
Revenue Concerns: The 16.9% year-over-year decline in sales has put the sustainability of the 36% quarterly stock gain into question.
Profit Turning Around: Net income improved to $44.8 million from a loss of $32.3 million the previous year, signaling a turnaround in profitability yet overshadowed by falling revenue.

Bitcoin Strategy Draws Limited Short-Term Support

GameStop’s foray into cryptocurrency has attracted attention but has yet to deliver noticeable short-term market comfort:

Stable Crypto Holdings: The company did not add to its bitcoin holdings in Q1 after purchasing 4,710 BTC (worth roughly $516 million at current prices) in May.
Speculative Pivot: Although the crypto pivot mirrors the strategy of companies like MicroStrategy, the lack of further acquisitions and operational guidance on its digital asset plan has left traders cautious.
Strong Liquidity: With $6.4 billion in cash, cash equivalents, and marketable securities—up significantly from $1 billion last year—GameStop has a solid liquidity position that supports its speculative strategy but does little to offset core retail sales concerns.

Analyst Sentiment and a Bearish Short-Term Outlook

Despite a notable earnings beat, market analysts remain skeptical:

Negative Ratings: The sole recommendation on Wall Street is a “strong sell,” with no “buy” or “hold” ratings in sight.
Price Target: Analysts have set a median 12-month price target at $13.50, well below the current trading levels.
Focus on Top-Line Performance: The after-hours drop underscores that traders are prioritizing top-line revenue performance over speculative strengths like bitcoin exposure or a strong treasury.

Conclusion

In summary, while GameStop continues to post quarterly profits and bolsters its balance sheet with a strong cash reserve, the substantial revenue miss raises serious questions about the long-term viability of its retail operations. Coupled with a cautious approach to its cryptocurrency strategy and a bearish sentiment among analysts, the current outlook for GameStop suggests that regaining momentum in the near term will be a steep climb.

Tags: #GameStop #EarningsBeat #RevenueMiss #StockMarket #Crypto

Bank of Canada Governor Calls for Evolving Mandate in an Era of Economic Uncertainty

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Introduction: Navigating a Shock-Prone Global Economy

In a world increasingly defined by economic turbulence, Bank of Canada Governor Tiff Macklem is calling for an evolution in the central bank’s mandate. Speaking after maintaining interest rates for the second consecutive time, Macklem reflected on the challenges of steering Canada’s economy through what he describes as a “shock-prone” global landscape.

The timing of Macklem’s remarks couldn’t be more symbolic – delivered just hours before the Edmonton Oilers’ dramatic overtime victory in Game 1 of the Stanley Cup finals. Much like his hometown hockey team, Macklem knows something about facing long odds and adapting strategies mid-game.

The Challenge of Maintaining Economic Stability

From Pandemic Recovery to New Challenges

Macklem highlighted the Bank’s recent successes, noting: “We got inflation down. We didn’t cause a recession.” The Governor pointed to the Bank’s handling of post-pandemic inflation as evidence that its current framework works, but acknowledged new challenges have emerged.

“Until President Trump started threatening the economy with new tariffs,” Macklem noted, “we were actually seeing growth pick up.” This abrupt shift underscores the unpredictable nature of today’s economic environment.

Rethinking Traditional Approaches

The Bank of Canada is reconsidering some long-held assumptions:

Supply shocks are no longer automatically dismissed as temporary
Data collection methods are becoming more nimble and granular
Policy responses require a more “nuanced playbook”

Deputy Governor Sharon Kozicki recently explained how the Bank now relies more heavily on surveys and real-time data to complement traditional economic models.

Housing Affordability and the Inflation Target

One of the most pressing issues facing Canadian policymakers is housing affordability. Macklem acknowledged the dilemma:

“High interest rates make mortgages more expensive while low rates can push up the price of housing itself because they stoke demand.”

While maintaining that monetary policy alone can’t solve housing challenges, Macklem suggested the Bank’s mandate could expand to better address this concern when it’s reviewed next year.

Canada’s Role in Global Economic Cooperation

As chair of the G7 this year, Canada finds itself at the center of international economic discussions. Macklem described recent G7 Finance Ministers’ Summit conversations as “candid,” acknowledging that while consensus isn’t always possible, cooperation remains essential.

“International co-operation has never been easy,” Macklem stated. “It is particularly difficult right now, but that doesn’t make it less important. That makes it more important.”

Lessons from Recent Economic Battles

The Bank of Canada’s recent experience offers several key insights:

Flexibility matters: The inflation targeting framework survived its toughest test in 30 years
Communication is crucial: More Canadians now understand the Bank’s role and decisions
Preparation is key: New types of data help respond faster to emerging challenges

Macklem emphasized that maintaining public confidence in price stability remains the Bank’s fundamental mission: “The economy does not work well when inflation is high. That’s all we can do for the Canadian economy. That’s what we can do for Canadians. And that’s what we’re focused on.”

Conclusion: Adapting to a New Economic Reality

As Canada’s economic team faces its latest challenge in the form of U.S. tariffs, Macklem’s message is clear: the rules of the game are changing. Just as the Oilers adapted their strategy between last year’s heartbreaking loss and this year’s finals, the Bank of Canada must evolve its approach to meet new economic realities.

With the mandate review coming next year, Canadians can expect serious discussion about how monetary policy should address not just inflation, but other pressing economic concerns like housing affordability. In this shock-prone world, flexibility and adaptability may become the most valuable tools in the central banker’s toolkit.

Tags: #BankOfCanada #EconomicPolicy #Inflation #HousingAffordability #CanadianEconomy

Global Markets in Flux: ECB Rate Cuts, US Labor Data, and Trade War Tensions Shape Economic Outlook

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Global Markets in Flux: ECB Rate Cuts, US Labor Data, and Trade War Tensions Shape Economic Outlook

Caption: Financial markets face pressure from mixed economic signals and geopolitical tensions.

ECB Maintains Cautious Stance Despite Rate Cut

The European Central Bank’s recent rate cut decision has failed to provide sustained relief for the Euro, as President Christine Lagarde maintained a cautious tone. The EUR/USD pair continues to face pressure amid growing trade risks and uncertainty about future policy moves.

Market analysts note that while the rate cut was widely anticipated, Lagarde’s reluctance to commit to further easing has left traders uncertain about the ECB’s path forward. This comes as:

Trade tensions between the US and China escalate
Global manufacturing data shows mixed results
Currency markets remain volatile

US Economic Indicators Paint Mixed Picture

Labor Market Shows Signs of Cooling

Recent US employment data reveals a softening labor market, with jobless claims rising to 247,000. The ADP report showed a sharp slowdown in job growth to just 37,000 in May, while JOLTs job openings unexpectedly rose to 7.391 million.

Caption: Diverging labor market indicators create uncertainty about the health of the US economy.

Consumer and Manufacturing Data Diverges

The ISM Services PMI dropped below the expansion threshold to 49.9, while CB Consumer Confidence jumped to 98.0. Meanwhile, durable goods orders slid 6.3% after four months of gains, with transportation orders down 17%.

China’s Economic Crosscurrents

China’s economic data reveals stark contrasts between sectors:

Services PMI shows expansion
Manufacturing PMI slumps amid trade war concerns
Job market weakness persists

President Xi faces difficult decisions about stimulus measures as the trade war with the US threatens China’s economic recovery. Recent court rulings blocking some Trump-era tariffs add another layer of complexity to US-China trade relations.

Caption: China’s manufacturing sector struggles while services show resilience.

Global Developments Impacting Markets

European Economies at Crossroads

Bulgaria progresses toward euro adoption
Portugal faces political fragmentation challenges
UK retail sales surprise complicates BoE rate cut timing

US Monetary Policy Outlook

The FOMC minutes confirmed the Fed’s patient stance on rate cuts, while April’s PCE inflation falling to 2.1% boosted expectations for steady rates in the near term. Michigan Consumer Sentiment remained unchanged at 52.2.

Commodities and Equities React

Energy markets saw an EIA natural gas storage build of +101 Bcf, exceeding estimates. Meanwhile, equity markets showed resilience:

Nasdaq 100 gained despite export restrictions on Nvidia
S&P 500 rebounded above 5900
Salesforce boosted revenue outlook

Conclusion: Navigating Uncertain Markets

The current economic landscape presents investors with numerous crosscurrents – from the ECB’s cautious easing to mixed US labor data and ongoing US-China trade tensions. While some sectors show resilience (services, consumer confidence), others face clear headwinds (manufacturing, durable goods).

Market participants should prepare for continued volatility as central banks navigate inflation concerns, geopolitical risks persist, and economic indicators send conflicting signals. The coming weeks will be crucial for determining whether current trends represent temporary fluctuations or more fundamental shifts in the global economy.

Treasury Secretary Bessent Vows No U.S. Debt Default

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Unwavering Commitment to Debt Obligations

Treasury Secretary Scott Bessent has firmly stated that the United States will “never default” on its debt, addressing concerns tied to the federal debt ceiling deadline. In a CBS Face the Nation interview aired on June 1, 2025, Bessent declared, “That is never going to happen,” reinforcing the government’s resolve to honor its financial commitments, even as negotiations continue over President Trump’s “big, beautiful budget bill.”

Debt Ceiling Deadline Looms

Bessent warned that the Treasury’s special accounting measures to stay within the debt ceiling could be depleted by August 2025, pressing Congress to raise or suspend the limit by mid-July to prevent market disruptions. He cautioned that failing to act could “wreak havoc” on the financial system and weaken U.S. global leadership, particularly as the “big, beautiful budget bill” ties debt ceiling increases to broader fiscal priorities.

Economic Strategy Amid Rising Debt

With the U.S. debt at $36.2 trillion, Bessent acknowledged its “unsustainable” path but emphasized growing the economy faster than the debt to stabilize the debt-to-GDP ratio. He dismissed short-term fixes for the ceiling and underscored fiscal discipline, stating, “We do not have a revenue problem: we have a spending problem.” This aligns with the goals of Trump’s “big, beautiful budget bill,” which aims to balance tax cuts with spending reforms.

Navigating Congressional Challenges

Republican leaders have linked a $4-5 trillion debt ceiling increase to Trump’s “big, beautiful budget bill,” complicating negotiations as some GOP members resist. Bessent avoided pinpointing an exact “X-date”—when the Treasury might run out of cash—to maintain leverage in talks. Despite market jitters, he expressed confidence in the U.S. economy’s strength, framing the bill as a step toward long-term fiscal stability.

Why the U.S.-China tariff pause could signal ‘good news’ for Canadians

News

As stock markets rallied after news of a 90-day trade war truce between China and the U.S., some stakeholders remain cautious about what it could mean for the Canadian economy and consumers.

“Canada’s industries have been hard hit by this trade war … any de-escalation at this time is good news for global trade,” says the Canadian Chamber of Commerce in a statement to Global News.

“We’ll be monitoring the China-U.S. discussion closely in the months ahead, as the details of any final agreement will matter.”

In a statement, the Retail Council of Canada also said the group, “welcomes this development, but we’re not popping the champagne just yet.”

“The 30% tariff that the U.S. continues to impose on itself is deeply damaging—not only to American businesses and consumers but also to global supply chains already facing significant disruption,” the council said.

What has changed in the trade war?

On Monday, U.S. President Donald Trump, along with Chinese officials, announced plans to reduce tariffs for a period of 90 days.

The U.S. agreed to drop its 145 per cent tariff rate on Chinese goods by 115 per cent to 30 per cent, while China agreed to lower its rate on U.S. goods by the same amount to 10 per cent.

Trump referred to Monday’s trade announcement as “a total reset with China.”

For the brief period that 145 per cent tariffs were imposed, it became very difficult for businesses to to operate normally with many seeking alternatives, or halting shipments altogether.

The news follows developments over the weekend after officials from China and the U.S. met in Geneva.

Pension Funds Won’t Save the Bond Market

News

Pension funds are in a healthier financial state than they have been in many years. That is good news for their beneficiaries, but not great for the long-term bond market, or the private-equity industry.

Only a slice of Americans in private employment these days have the benefit of a corporate defined-benefit retirement plan. Yet corporate pension funds still represent a major force in the markets, with more than $3 trillion in assets, according to Federal Reserve data.

Pension funds have been a driver behind the growth and success of the private, alternative investment industry. And they are key players in the market for corporate and government bonds because they have long future payout obligations that can match those securities’ long duration. So when they start to change what they do, it is a big deal.

Thanks to strong equity returns and rising yields in recent years, corporate pension plans have made a big jump in how well their assets can cover their future obligations.

Back in 2020, the 100 largest U.S. public-company corporate defined-benefit pensions in an index tracked by actuarial and consulting firm Milliman had an aggregate funded ratio of 88%. Some of the largest pensions in the index include those sponsored by automakers Ford Motor F 1.57% increase, and General Motors GM 2.10% increase, along with aerospace companies RTX and Boeing BA -0.41% decrease.

Then at the end of 2024, Milliman’s tracker showed a ratio of 101%. It was the first time since 2007 the index had reached full funding.

This is a big change that investors should consider as they weigh the recent move up in yields on 30-year Treasury bonds. The question is whether that move, sparked in part by worries about the U.S.’s future fiscal deficit, represents a lasting shift in yields. Yields on 30-year Treasurys in May touched 5.15%, near their highest level since 2007, and are still trading around 5%.

With full funding and with many corporate pension plans being “frozen” to new beneficiaries, their focus can increasingly shift away from chasing returns to catch up. Instead, they can focus on matching their assets and liabilities and keeping enough liquidity on hand to make their continuing payouts.

Getting to a derisking point for some pensions has been aided by a lot of buying of bonds that could effectively match up with their long-term liabilities. But from here, many pensions might be thinking not only of shifting out of riskier equities, but also out of the longest-term bonds and into more intermediate-dated ones as their pool of beneficiaries ages.

This dynamic has arguably been one factor at play at the long end of the bond market, meaning in the bonds with the furthest-away maturities. U.S. Treasury data tracked by research analysts at Bank of America show a drop-off in demand for a form of long-term Treasury securities popular with pension funds in the early months of 2025.

“You don’t see the same strong demand from well-funded pensions for bonds at the long end of the curve,” says Meghan Swiber, U.S. rates strategist at Bank of America.

Besides shifting into more medium-term bonds, it also can make sense for funds with aging beneficiaries to wind down some relatively illiquid investments, including private equity, in favor of ones that can be more readily sold when needed.

“As funded status increases, it’s time to take risk off the table,” says Gary Veerman, head of institutional solutions at investment manager Capital Group. “Illiquidity now can be a big headwind to pensions.”

AI Deployment Reaches Critical Mass

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Corporate AI Adoption Accelerates

Businesses are rapidly integrating artificial intelligence, with UBS deploying virtual research analysts to brief staff on market trends. This reflects a broader trend where companies like IBM, Microsoft, and Google are leveraging AI, potentially leading to significant layoffs. Anthropic’s CEO warns that AI could eliminate half of entry-level white-collar jobs within one to five years, signaling a seismic shift in the labor market. Nvidia’s soaring profits last week underscore the economic momentum behind AI, even as political figures like Steve Bannon highlight job disruption as a key issue for the 2028 presidential elections.

Economic and Social Implications

The rapid rollout of AI is linked to rising youth unemployment, particularly in industries like finance, healthcare, software, and media. Sales and marketing departments are also heavily impacted. The U.S. is at the forefront of this transformation, which could boost American business productivity but also create political and social tensions. The scale of disruption is becoming palpable, with AI’s influence extending beyond simple tasks to complex research and analysis, promising significant productivity gains.

U.S. Leads in AI Investment

The U.S. has a historical edge in technology adoption, with higher spending on research and development and intangible capital investments driving productivity surges in the 1990s and 2000s. In 2024, U.S. private AI expenditure reached $109 billion, dwarfing China’s $9.3 billion and the UK’s $4.5 billion. U.S. institutions produced 40 notable AI models, compared to China’s 15 and Europe’s three, according to Stanford University research. This investment gap positions the U.S. as a global leader in AI innovation.

Structural Advantages in the U.S.

The U.S. benefits from a flexible labor market, substantial capital from tech giants, a vibrant startup ecosystem, and a relatively permissive regulatory environment. A provision in Donald Trump’s budget bill prevents states from regulating AI individually, potentially accelerating deployment compared to Europe. This could lead to another productivity divergence, similar to the 1990s when U.S. firms adopted software and web technologies faster than their European counterparts.

Global Competition and Open-Source Challenges

China’s DeepSeek, with its open-source approach, challenges U.S. dominance in AI. Taiwanese investor Kai-Fu Lee notes that while Chinese firms excel in consumer AI apps, their enterprise spending lags behind the U.S. The popularity of open-source models like DeepSeek highlights vulnerabilities in U.S.-China tech decoupling, as businesses and individuals can access these models despite restrictions on chip flows. This dynamic may favor a China-led open-source technology stack in the long term.

Economic Growth vs. Social Backlash

AI-driven productivity gains could fuel economic growth and bolster U.S. corporate profits, providing a bright spot for investors. However, the rapid pace of AI adoption risks a white-collar backlash. Surveys indicate public support for slowing AI deployment, and an Oxford Economics study links higher college graduate unemployment to AI labor substitution. This could dampen economic growth if young people face reduced purchasing power, illustrating the dual-edged nature of AI’s impact.