💰 5 Fact Friday: NATO's $3T Power Move

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MARKETS
1. From Crisis To Comeback 📈

Monday’s newsletter read, “Fortunately, oil shocks often pass quickly.” But a same-day resolution? Didn’t see that coming.

Not long after “WWIII” was trending on X, markets breathed a collective sigh of relief. Iran’s retaliation to the U.S. strike was viewed as symbolic and, apparently, within the “acceptable” range.

Trump immediately called for peace, and after both Iran and Israel seemed to get in their final punches, a fragile peace emerged. As always in the Middle East, it feels necessary to say “for now”—but we’ll take it.

Markets surged on the de-escalation. Oil cooled, equities ripped higher, and the rally is still running.

As of yesterday afternoon, the S&P 500 closed less than 0.1% away from an all-time high and up 4% on the year. According to Opening Bell Daily, that makes 2025 above average for an election year.

Not bad for a market that’s weathered trade wars, actual wars, elevated rates, and a splintered Mag 7.

Sure, Meta (+24%), Microsoft (+18%), and Nvidia (+15%) have pulled their weight in 2025. But Apple (-20%), Tesla (-19%), and Google (-8%)? Not so much.

Thankfully, the rally has broadened.

The Nasdaq 100 just hit a new all-time high, with two-thirds of its holdings in the green this year. Leading the charge? Names like Palantir (+91%), Zscaler (+74%), and Micron (+50%).

Meanwhile, Nvidia is back on top as the world’s most valuable public company. Past runs at #1 have been brief and coincided with short-term market peaks.

Will this time be different?

It remains to be seen. But with the White House calling the July 9th trade deadline “not critical,” I suspect so.

So, where do we stand? Right back where we were in February—along with yet another example that staying the course works.

The first half of 2025 offered no shortage of reasons to flinch. But it also made one thing clear: investing rewards patience.

PERSONAL FINANCE
2. BNPL Enters The Era of Accountability ⚖️

Buy now, worry later? Not anymore.

This week, FICO announced it will officially factor Buy Now, Pay Later (BNPL) loans into its credit scoring models for the first time ever.

The move ushers in FICO Score 10 BNPL and FICO Score 10 T BNPL. These two new scores track repayment history on those “four easy payments” used to finance everything from groceries to Gucci.

Let’s be honest: this was overdue.

Although BNPL has long been called phantom debt, it’s always been real debt. And the amount of that debt has exploded.

Americans spent $109 billion using pay-later loans in 2024, up from $2 billion in 2019. With 90 million Americans expected to use BNPL this year, it was only a matter of time before the scoring system caught up.

Rolling out this fall, the new scores aim to offer lenders a more complete view of consumer creditworthiness.

For many users, the news is good: early testing found that consumers with five or more BNPL loans often saw their scores increase or stay stable.

But that’s just one cohort of users.

A recent study found that 41% of BNPL users were late on a payment in the past year. For them, even small purchases—like financing a burrito—could leave a lasting mark.

Bottom line? BNPL is no longer off the radar. Whether it helps or hurts your score now depends on what it always has: how well you manage your debt.

MARKETS
3. NATO’s Spending Pledge Is Defense’s Dream 💰

Defense spending just got a massive upgrade.

On Wednesday, NATO made its boldest financial commitment in years: a pledge to raise annual defense and security spending to 5% of GDP by 2035. That’s more than double the old 2% benchmark.

If members follow through, spending could skyrocket from $1.5 trillion in 2024 to over $3.0 trillion by 2035.

The difference? Annual growth of 7%, which is about 2.5x higher than what we’ve seen over the last decade.

The big winners, of course, include traditional defense firms—many of which pull in 70-95% of their revenue from military spending. But war is evolving, and NATO’s 5% target includes more than just tanks and troops.

So think jets, missiles, and naval ships, but also drones, AI chips, and cybersecurity systems.

Stocks To Watch

• Lockheed Martin (LMT), Raytheon (RTX), and General Dynamics (GD) are go-to arms suppliers

• Northrop Grumman (NOC), AeroVironment (AVAV), and Huntington Ingalls (HII) benefit from NATO’s drone and naval focus

• Palantir (PLTR) and NVIDIA (NVDA) ride the AI and infrastructure investment wave

And don’t sleep on European contenders:

• Rheinmetall (RHM) and Saab (SAAB-B) gain from Eastern European contracts

• BAE Systems (BA) and Dassault Aviation (AM) build next-gen fighter jets

• Safran (SAF) and Airbus (AIR) expand in defense aviation and satellite systems

This is more than a tailwind—it’s a full-blown paradigm shift. If allies stick to the plan, defense is poised to become a long-term growth sector.

Investors certainly think so.

Both the iShares U.S. Aerospace & Defense ETF $ITA ( ▲ 1.65% ) and the STOXX Europe Aerospace & Defense ETF $EUAD ( ▼ 0.66% ) closed at all-time highs yesterday.

ECONOMY
4. Treasury Market First, Safety Second? 🤔

The Fed is dialing back one of the strictest post-2008 financial regulations.

In a 5-2 vote, the central bank proposed easing the Enhanced Supplementary Leverage Ratio (eSLR). The rule currently requires the largest U.S. banks to hold 5% of their total leverage exposure in “Tier 1” capital, such as common stock.

This change would drop that threshold as low as 3.5%, potentially freeing up $185B in capital, according to Morgan Stanley.

Major banks like JPMorgan (JPM), Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS) would benefit directly. But if the change works as intended, the U.S. government’s budget may also benefit from lower interest payments on debt.

Of course, easing regulations is never without controversy.

Pros 🚀 

• Boosts Treasury demand: Eases pressure on banks, making it easier for them to buy and hold U.S. Treasuries

• Reduces volatility: Could lead to more stable yields and smoother Treasury market functioning

• Lowers interest costs: Increased demand for Treasuries = lower yields = less interest paid on U.S. debt (a taxpayer win)

Cons ⚠️

• Increases systemic risk: Smaller capital buffers raise the odds of a major bank failure

• Incentive misalignment: Critics say banks could simply return capital to shareholders instead of buying Treasuries

• Public liability: Less capital means more risk of taxpayer bailouts—a reminder of 2008

Ultimately, the Fed is prioritizing smoother Treasury markets over tighter bank regulations.

That might help stabilize yields and lower interest costs, but it also assumes banks will act responsibly. And we’ve seen how that movie ends.

The proposal is now open for public comment, with more rollbacks likely to follow.

STOCKS
5. Guess That Stock 🕵️‍♂️

This company was once dead in the water, but now it’s making waves with record earnings. Can you name the stock?

1. This is the world’s biggest cruise operator, with 90 ships in its fleet. They sail under brands like Princess, Holland America, Costa, and the company’s own namesake line.

2. It once symbolized pandemic peril. Now it's thriving, posting the best second quarter in company history, with revenue up 10% year-over-year.

3. The CEO credits “tremendous value compared to land-based alternatives” as the reason the company hit its 2026 financial targets 18 months ahead of schedule.

4. Known as "America’s cruise line," this stock jumped nearly 7% after its earnings beat, lifting other travel names along with it.

5. If you’ve ever spotted a ship with a bright red whale tail, you’ve seen one of theirs in the wild.

Got a guess? Tap here for the answer → 

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