The Transcript Q2 2025 Letter
Reviewing the key themes from Q2 25 through C-suite quotes
Summary: With the second quarter coming to an end, here are some themes that we’ve picked up in transcripts throughout the last few months.
Editor’s Note: We have made this edition available to all subscribers. If you’re not a premium subscriber already, we hope that you will read this and subscribe!
Macro
The second quarter of 2025 began with a near-panic. The administration launched Liberation Day tariffs on April 2, which led to a sharp pullback in equities and a drop in sentiment among both consumers and CEOs. However, as the quarter progressed, Trump’s moratorium on tariff implementation helped ease concerns. The S&P 500 staged a steady recovery and is now, surprisingly, up 6% year-to-date.
"So we found out today this episode from April 3 to today is the fastest bounce-back after a 15 percent decline in S&P history, fastest bounce-back ever." - U.S. Treasury Secretary Scott Bessent [30th Jun – Bounce Back]
Throughout the quarter, consumers remained resilient. Earnings calls revealed that while confidence wavered during the initial trade flare-up, spending activity remained steady. By June, sentiment had largely stabilized. Currently, the tone is cautiously optimistic but not exuberant.
“The U.S. consumer remains a source of strength in the economy. That's true for almost any metric that we look at." – Capital One Financial (COF 0.00%↑) CEO Richard Fairbank [28th April – Resilient Consumer, Messy Supply Chain]
“The U.S. economy and the U.S. consumer is showing tremendous resilience.” - Goldman Sachs (GS 0.00%↑) COO John Waldron [2nd June – Tremendous Resilience]
"The consumer is still in the game. The consumer's confidence is as exhibited by spending continues to be strong.” – Truist Financial (TFC 0.00%↑) CEO William Rogers [23rd June – Real Change]
The Federal Reserve remained on hold throughout the quarter. Jerome Powell emphasized trade policy as justification for patience, but Powell’s influence on markets and interest rate policy is waning. Trump has signaled a clear preference for a more dovish approach and has not refrained from directly attacking Powell. Markets are increasingly looking ahead to potential leadership changes at the Fed and will begin to evaluate what a more dovish policy could mean for inflation.
“Maybe I should go to the Fed... Am I allowed to appoint myself at the Fed? I’d do a much better job than these people...” – US President Donald Trump [23rd June – Real Change]
International
U.S. equity markets rebounded, but the dollar remained soft. This may reflect improved growth prospects abroad and less confidence in US leadership internationally. Europe’s economy appears poised to accelerate thanks to infrastructure and defense spending. The regulatory environment in Europe may, however, remain a barrier.
“There's robust infrastructure investment programs everywhere in Europe, it's especially now in conjunction with defense spending.” -Bentley Systems (BSY 0.00%↑) CEO Gregory Bentley [27th May – Not Falling Off a Cliff]
"The EU operates under 27 different legal systems...The result is paralysis...However, the ground in Europe is shifting." – BlackRock (BLK 0.00%↑) CEO Larry Fink [9th June – Fallout]
China's economy continues to face challenges. The post-COVID recovery has not been as robust as hoped, and structural issues in construction and real estate persist.
"China, I would say, is a sentiment not too dissimilar from the U.S. Consumers are pulling back. They feel the economic challenges…So China is a little bit stressed." – General Mills (GIS 0.00%↑) CEO Jeffrey Harmening [16th June – Keep Moving Forward]
“When I think about the outlook for the year, we're still not assuming an economic recovery. We're expecting muted conditions…Economic outlook in China continues to be muted.” - Thermo Fisher Scientific (TMO 0.00%↑) CEO Marc Casper [20th May – Sigh of Relief]
Throughout the quarter, geopolitical concerns were prominent. The war between Israel and Iran had the potential to be particularly destabilizing, but markets were mostly unfazed by the conflict.
Financials
The spike in volatility earlier in the quarter temporarily slowed capital markets activity. However, deal pipelines began to unclog in May and June. The IPO market showed signs of health, with several successful launches. M&A activity also shows signs of picking up as CEO confidence improved.
“Given the strength of our current backlog, overall activity levels, and an abundance of discussions with clients around capital formation, strategic opportunities and their need to transact, we are increasingly optimistic about the second half of 2025." - Jefferies (JEF 0.00%↑) CEO Richard Handler and President Brian Friedman [30th June – Bounce Back]
"What's changed in recent weeks is we started to see the announcements pick up. We've seen those announcements, and we see them hitting the tape, and that's positive." – Morgan Stanley (MS 0.00%↑) Co-President Edward Pick [23rd June – Real Change]
Retail investors continued to participate actively. Transcripts pointed to steady buying from individual investors, even during the early-quarter downturn.
"Margin balances are as high as we've ever had them...[our customers] were very strongly buying the dip…this is like the second occurrence where I would argue retail came to the rescue of the market, COVID probably the first." – Robinhood Markets (HOOD 0.00%↑) Chief Brokerage Officer Steven Quirk [16th June – Keep Moving Forward]
Consumer
Consumer behavior remained steady overall, although there is continued divergence across income brackets. Higher-income households are spending freely on travel, dining, and events, while lower- and middle-income consumers are showing more conservative habits. Increased price sensitivity, trade-down behavior, and selective purchasing were recurring themes. Segments requiring financing—such as housing, RVs, and boats—remained subdued.
“I think at the lower end of the income spectrum, it's more of a challenge. And at the upper end, it seems to be smooth sailing. But generally speaking, we haven't seen any deterioration in our portfolio the last couple of months." – Carlyle Group (CG 0.00%↑) CFO John Redett [16th June – Keep Moving Forward]
"We recognize that the housing market and, therefore, the furniture industry may remain soft this year as interest rates are still high." – Williams Sonoma (WSM 0.00%↑) CEO Laura Alber [9th June – Fallout]
Some companies noted that households are spending at levels that may not be sustainable over the long term. The pandemic-era shift toward elevated consumption appears to have become a new norm. This is supported by strong employment for now.
"Our spending habits got turbocharged with the stimulus, and they never got unwound. And maybe some of that is at the heart of the disconnect. We've gotten used to a certain way of living - we can't really afford it. All the base numbers are good, but I don't think people feel like they're on -- there's much of a safety net around them." – Upstart (UPST 0.00%↑) CTO Paul Gu [16th June – Keep Moving Forward]
Technology
Artificial Intelligence continues to dominate the conversation in both the technology sector and broader capital markets. Large tech firms are committing significant capital to data center expansion, supported by explosive demand for AI inference with capacity constraints persisting.
“What you see is a capital investment slowdown, except for AI in certain places." – Bank of America (BAC 0.00%↑) CEO Brian Moynihan [2nd June – Tremendous Resilience]
“....there continues to be investment in AI infrastructure. And so with that, we would expect strong growth into the second half of the year." – Advanced Micro Devices (AMD 0.00%↑) CEO Lisa Su [12th May – Mixed but Stable]
"...while we continue to bring data center capacity online as planned, demand is growing a bit faster. Therefore, we now expect to have some AI capacity constraints beyond June." – Microsoft (MSFT 0.00%↑) CFO Amy Hood [5th May – Buffett Rides into the Sunset]
We are seeing more conversations about the impact of AI on labor markets, along with two opposing viewpoints. Some think AI will create totally new kinds of jobs, just like technology has always done. Others are worried that AI could lead to significant job loss, potentially even double-digit unemployment.
"The question really is, will AI be more augmenting labor or replacing labor?... AI should be creating jobs at the same time. It may be replacing. It may be doing both." – Federal Reserve Chair Jerome Powell [23rd June – Real Change]
Transcripts noted early evidence of rising unemployment among software engineers. Software programmer unemployment has risen above 7% compared to 4.2% nationally. Even AI research labs are beginning to trust AI systems with responsibilities that traditionally required human oversight, including self-training. Meanwhile, demand for skilled trades is surging, with some electricians now earning $200K a year amid acute shortage.
"...you can see it also come through in the unemployment rate for software programmers here in the U.S., which is above 7% right now, and we're at 4.2% unemployment for the country." – ManpowerGroup (MAN 0.00%↑) CEO Jonas Prising [22nd April – Watching and Waiting]
"I was talking to one of the big hyperscalers who’s trying to rapidly build out a Data Center, and to get electricians, they had to pay a 40% premium. That means these electricians are making, on average, $200,000 a year." — BlackRock (BLK 0.00%↑) CEO Larry Fink [7th April – Ah, S--t]
Industrials
Supply chains are adapting to Trump’s trade policies. Despite his moratorium, companies are still dealing with continued uncertainty around how long the moratorium will last and planning as if tariffs could come back. This means attempting to on-shore as much as possible and especially reducing exposure to China.
"Are you going to make that investment in Mexico for scale manufacturing? You may or may not. My guess is you probably won't, unless you have comfort... that 25% will be there for the next 15 years, 20 years." – Fastenal (FAST 0.00%↑) CEO Daniel Florness [14th April – Blink of an Eye]
Meanwhile, China has demonstrated that it has meaningful leverage in trade negotiations. Its move to restrict rare-earth metal exports brought the US industrial economy to the brink of a complete halt. Its automotive industry may be the world leader in EVs. It is also making quick progress in AI, including in designing GPUs.
“...we are now in this world where, again, the theoretical of the Chinese control of the rare earth supply chain is now truly actual. It is a source of leverage. And to get rare earth magnets, if you're any company in the world, you need to get a license from the Chinese government….The idea that our downstream great industrial base is going to need permission, licensing permission from the Chinese government to get rare earth magnets is obviously an enormous long-term crisis." - MP Materials (MP 0.00%↑) CEO James Litinsky [30th June – Bounce Back]
Energy & Materials
Despite conflict in the Middle East, oil prices have not taken center stage for capital markets or even the energy sector. Even within the energy space, the rapid growth of AI dominates the conversation. It’s now well known that demand for AI inference and training will require large infrastructure investments in electricity production.
"Energy is the most precious commodity today in building this large AI factories, AI clusters…every saving on the power will help." – Lightwave Logic (LWLG 0.00%↑) CEO Yves LeMaitre [16th June – Keep Moving Forward]
Executives across the utility and energy sectors noted that current renewable capacity may not be enough to meet this demand. As a result, nuclear power is receiving renewed attention as a reliable, low-carbon solution. Natural gas is also expected to play a role, and the rising tide may even lift coal.
"For perspective, we expect more than 450 gigawatts of cumulative demand for new generation between now and 2030 in the United States…Energy realism is about embracing all forms of energy solutions and understanding the demand for electricity in the United States is here now, and it's not slowing down. Frankly, it's unlike anything we've ever seen since the end of World War II." – Nextera Energy (NEE 0.00%↑) CEO John Ketchum [28th April – Resilient Consumer, Messy Supply Chain]
Looking Ahead
As we enter the second half of 2025, two key questions will likely be on investors' minds.
First, how will the administration approach trade policy through the end of the year? The current moratorium has helped stabilize markets, but will Trump continue to show willingness to negotiate? The best bet is that he will act to keep markets calm.
"Let me just say this much. I think over the next 30 to 60 days, the trade environment will change. And so we will see how that evolves, and it was very dynamic. And at that point, we'll be able to be more prescriptive." - FedEx (FDX 0.00%↑) CEO Rajesh Subramaniam [30th June – Bounce Back]
Second, what path will the Federal Reserve take? While Powell has appeared to dig in his heels, he could use the Jackson Hole conference as an opportunity to change direction. Either way, Powell will increasingly be viewed as a lame duck. Lower interest rates are on their way.
"So there is a chance that the person who is going to become the chair could be appointed in January, which would probably mean an October-November nomination." - U.S. Treasury Secretary Scott Bessent [30th June – Bounce Back]
For now, companies are continuing to adapt, and capital markets are continuing to climb. We will be watching closely to see how this balance develops.
"…with the S&P grinding higher, the wall of worry being climbed, the sense that perhaps the outlooks are, in fact, improving again, the markets businesses led by our equities business, but also the stability of fixed income have hung in there...we'll see animal spirits in the boardroom." – Morgan Stanley (MS 0.00%↑) Co-President Edward Pick [23rd June – Real Change]