MARKET RECAP
🩸 Markets Cap Off Worst Losing Streak in 4 Years, Citi Strategist Says $200 Oil Could Be Coming Soon

🤞 Every week this month, investors have crossed their fingers hoping for a speedy end to the Iran-US conflict that has plagued the stock market… and at the start of this week, those hopes seemed like they might come true.

📈 On Monday, Trump posted on Truth Social that the U.S. and Iran had “very good and productive conversations,” causing the S&P 500 to soar +1.15%. But despite our high hopes on Monday, little did we know we were in for a rollercoaster of a week…

💣 So before we dive into our main story of the week (Meta/Google’s massive legal loss), here’s the play-by-play on the US-Iran war and the impact it’s having on the stock market:

• 📉 Tuesday, markets fall -0.37% after Iran’s speaker of parliament calls Trump’s claim ‘fabricated news’

• 📈 Wednesday, markets jump +0.54% after reports that Iran had received a 15-point U.S. peace proposal.

• 🩸 Thursday, the pain really began, with markets falling -1.74% after Iran rejected the proposal and issued its own counter demands, including war reparations and formal control of the Strait of Hormuz.

• 🩸 Friday, markets continue to fall -1.67% despite Trump’s attempts to calm nerves by granting a 10-day extension on his 48-hour threat to ‘obliterate Iranian power plans’ (discussed last week). Oil hit $113 a barrel with the West Texas Intermediate (the U.S. benchmark) crossing $100 per barrel for the first time since 2022.

😰 Overall, it was a very rough week, capping off the market’s longest losing streak in nearly 4 years. Across the indexes:

• The S&P 500 ended the week down -2.12%

• The Nasdaq 100 fell -3.20%

🍁 The one saving grace was the Canadian TSX index, which rose 2% thanks to gains in materials and energy sectors (industries that benefit when oil prices surge).

📉 The S&P 500 is now down roughly 8% since the war began on February 28th, with the Nasdaq officially entered correction territory, falling 10% from its all-time high.

💡 And while this is incredibly painful… it’s worth noting this isn’t actually all that rare.

🤖 According to Beevis (Blossom’s AI Investing Assistant, which is trained on the context of your real portfolio and goals):

🧘 So at this point, the ~10% drop is pretty ‘par-for-the-course’ for the long-term investor and is something you should get used to if you have a long time-horizon… but what makes this drop scarier than normal is that it shows no signs of slowing anytime soon, with strategists at Citi Group releasing a frightening 165-page report on their outlook:

🛢️ Citi’s $200 Oil Warning

☀️ Ok, not to add to the doom-and-gloom, but I feel like when one of the top strategists on Wall Street compares what’s going on to the ‘sun exploding,’ I’m obligated to keep you guys in the loop…

🛢️ According to strategist Maximilian Layton, based on historical data, oil could push above $200 a barrel if the conflict remains unresolved, saying that the current supply shock is potentially larger than the 1970s oil crisis as a share of global supply, and that markets could sink much further as oil continues to climb, saying:

👍 The good news out of the report is that they say “it’s not too late to hedge upside risks to global inflation with commodities” and also point to gold as a strong hedge to the “largest inflation shock in 50 years.”

🕊️ Now, if we do get a quick Iran-US deal where the Strait of Hormuz reopens (fingers crossed), this hedging would be unnecessary, so what to do from here really depends on your view of how long this conflict will last.

💡 The honest answer is that nobody knows how long this drags on, not me, not Citi, not even Trump. What we do know is that markets have historically recovered from every geopolitical shock, including ones that felt this open-ended. If you have a long time horizon, the playbook hasn't changed: stay diversified, don't panic-sell, and use a crash like this as a chance to double-check your portfolio is matching your risk and time horizon.

⚙️ Alright, let’s switch gears a little, because while the market overall had a rough week, two Mag-7 tech stocks got hit even harder, falling over 8% after losing a landmark lawsuit…

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TOP STORY
🧑‍⚖️ Meta and Google Fall 10% After Social Media Addiction Lawsuit

⚖️ The ongoing war wasn’t the only big story this week… on Wednesday, a Los Angeles jury found Meta and Google liable in a ruling that Instagram and YouTube were deliberately built to be addictive and that their executives knew this and failed to protect their youngest users.

💰 Meta was ordered to pay 70% of the compensatory damages and Google 30%, with a total of $3 million. Then just hours after the verdict, the jury added $2.1 million in punitive damages against Meta and $900,000 against Google, upping the total to roughly $6 million.

👦 This was Meta’s second lawsuit loss this week. Just 2 days before, it was ordered to pay $375 million in New Mexico for misleading users about child safety and enabling harmful behaviour affecting minors.

👀 The case referenced internal memos released where Zuckerberg said, “if we want to win big with teens, we must bring them in as tweens,” along with internal reports showing that 11-year-olds were 4 times more likely to keep returning to Instagram (despite the platform ‘requiring’ users to be 13+)

📉 Meta ($META) fell 13% on the news, while Alphabet (Google) ($GOOGL) fell 7%.

🚬 Big Tech’s “Big Tobacco” moment

😰 The fear here isn’t about the $6 million (which for these companies is a rounding error), but whether this opens the floodgates to more aggressive (and more frequent) rulings like it in the not-so-distant future.

⚖️ In fact, this case is just one of more than 1,500 similar cases expected to go to trial. And while one trial won’t determine the outcomes of them all, it could help guide the direction.

💰 Some analysts say repeated losses like this at scale could put tech giants on the hook for billions and force them to change their platforms in a way that could mean less profit. Potentially even hundreds of billions:

🏛️ Both Meta and Google are expected to stand trial later this year in the first of hundreds of additional lawsuits from school districts and state attorneys general, marking a new legal push that some analysts have called Big Tech’s “Big Tobacco” moment.

🤔 What Analysts Are Saying

🛡️ Tech companies like Meta have long relied on “Section 230” protections, which shield social media platforms from liability for user-posted content.

🎨 But the key change in lawsuits going forward is the idea of “deliberate design,” where plaintiffs argue that Meta and YouTube made deliberate design choices to make their platforms more addictive to children. Something “Section 230” can’t protect from.

🎰 One of the arguments for this case was “infinite scroll,” and how social media algorithms borrow behavioural techniques used by slot machines and the tobacco industry.

📊 And in cases like these, it’s the precedent that matters, not the damages. And analysts are worried that a large increase in similar lawsuits targeting social media features and design could force changes to the platforms, which could affect profitability:

📉 Meta is now down 19% year-to-date, while Google is down 12%. But even with the drop, most of Wall Street remains bullish, with analysts rating Meta a ‘strong buy’ with a $865 price target (64% above the current price).

😰 Despite the optimism, this week certainly marked a massive blow in Meta’s ability to stay out of the legal crossfires… and is worth keeping a close eye on for shareholders.

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NEW FEATURE ANNOUNCEMENT
🤖 Beevis, Blossom’s AI Investing Companion, is Live!

🤖 I touched on this a few times throughout the newsletter, but it’s big enough news to warrant its own section. This Friday, we released a massive new feature: Beevis, Your AI Investing Companion.

🤔 So why use Beevis instead of ChatGPT or Claude? Well, for one, it’s built on the same LLM (meaning the AI model is the same), but the major difference is that Beevis has the context of what’s in your portfolio, making its responses much more relevant to your unique situation.

😎 For example, Beevis can:

• Help flag key risks in your portfolio

• Give you a market recap focused on the news that caused the biggest swings in your holdings

• Teach concepts with specific reference to stocks/ETFs you hold

• And much more!

🌼 The Blossom team really put their blood, sweat, and tears into making this new feature incredible, and I can’t wait for you to try it out!

FROM THE BLOSSOM COMMUNITY
⭐️ Top Discussions of the Week

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