Who Wins in the U.S.-EU “Deal”? Wall Street Turns Bullish on Nike & Anthropic’s $150B Valuation

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2:10Welcome to Prof G Markets. I'm Ed Elson. It is July 29th. Let's check in on yesterday's market vitals. The major indices were mixed as investors digested the trade deal with the EU. We'll talk more about that in a second. The S &P 500 and the Nasdaq both hit new records. The Dow fell slightly. The dollar climbed the most since May as the euro fell sharply. And finally, oil prices rose after President Trump shortened the timeline for Russia to end the war with Ukraine. OK, what else is happening? Trump has reportedly struck a deal with America's largest trading partner, the EU. While the details aren't yet confirmed, it is reported that the EU has agreed to pay a 15 % tariff rate on most goods.

2:53Europe also agreed to increase their investment level in the US by more than$600 billion. This framework follows the July 11th letter from Trump, which threatened a 30 % tariff rate on EU goods unless a deal could be struck by August 1st. On the news, the markets were mostly unaffected. The S &P finished the day about 0.2 % higher. The Nasdaq closed up more than 0.3%. The Euro Stock 600, an index of leading European blue chip companies. That ended the day down a little over 0.2%. So Trump has completed a deal with the EU. This one, according to the president, is, quote, the biggest deal ever reached in any capacity.

3:36This comes less than a week after Trump made a deal with Japan, which was, in his words, quote, the largest deal ever made. So both of them record-breaking deals. This deal's even bigger than the last one. Truly historic. I say that sarcastically, but I should add that actually a lot of people do believe it. Many people online and in the media are viewing this deal as a crucial victory, as evidence that the Trump strategy is working, that he's getting deals done, that he is winning. And it's not just Jesse Waters or people on Fox. It's more than that. Here's a Bloomberg opinion headline from yesterday, quote, Europeans not Trump ended up chickening out.

4:16Here's another one, quote, Trump wins the Hulkamania tariffs brawl he started. Here's a tweet from a mainstream financial journalist, quote, Trump is winning on trade. So many people are calling this deal a win for Trump. And you can kind of see why he threatened these tariffs. And in return, he got this commitment from the EU to invest$600 billion into the US. Sounds pretty good. But it also sounds very similar to the deal we saw with Japan last week, which was a reduction in tariffs and in return, a commitment to invest$550 billion into the US. And so considering this is essentially the same thing, I will ask essentially the same questions I asked last week, which are, what are they investing in, what are the terms of the investment, what is the timeline, and has anything been signed?

5:10And as with last week, the answers this week are the same. For the first three questions, the answer is we don't know. And for the final question, the answer is no, nothing has been signed. This is once again a framework of a deal, meaning that everything Trump is saying, literally all of it, is subject to change. And as we discussed last week, this is a recurring theme in Trump land that, by the way, has consistently never worked. Whether it was the$200 billion commitment from China, which never actually materialized, or the$600 billion investment plan that was a trillion and then$300 billion and then$600 billion from Saudi Arabia hasn't materialized, or the$500 billion from Apple, or the$500 billion from OpenAI and SoftBank, over and over again, we see an announcement of a deal, a big headline.

6:02And then six months later, we look back and we realize actually, no, nothing ever happened. Nothing was signed, nothing changed. And thus, no deal got done. This is the reality of Trump's dealmaking. And what is most ironic about this is the fact that in the same week that we learn of this historic trade deal with the EU, we also learn some new information about the historic trade deal with Japan. The trade deal that was supposed to have Japan invest more than$500 billion into America and that America was supposed to receive 90 % of the profits on. That was the deal, which, by the way, we said would never materialize.

6:41Well, we now have some clarification on that deal from the Japanese government. This came out over the weekend. According to Japan's chief negotiator, Of that$550 billion, only 1 % of it will actually be invested in America. The remaining 99 % are going to take place in the form of a loan, which the Japanese government is going to collect interest on. So put another way, no, Japan isn't investing$550 billion. They're investing$5 billion. And by the way, the timeline has also been clarified to three and a half years, which means that Japan's annual investment into the US is going to come out to one and a half billion dollars.

7:24That is 26 times less than the amount of money OpenAI just raised in a private venture round. So as predicted, the Japan deal was not a deal. The only thing we got wrong about that one was that the truth came out way quicker than we anticipated. And here we are all over again with Europe. A$600 billion commitment with no deal terms, no timeline, and no signatures. Now, people might say, what about the$750 billion they say they're going to spend on energy? To which I would say, once again, not a deal. Nothing's been signed. And in addition, Europe was already going to buy that energy because of this very widely understood concept called the Ukraine war.

8:07So as has been proven with Japan, this is once again not a deal. This is a press release. This is Europe saying something to make Donald Trump appear victorious and therefore make him happy. We know that's basically all he cares about. So let's go back to our deal tracker. And just to remind you of what our definition of what a deal is, our definition is a contract or a treaty that is signed and ratified into law. That's what we think a deal is. This doesn't meet that definition. So today is July 29th. We're about 190 days and probably 50 tariff announcements into this presidential administration.

8:48And we are currently sitting on a grand total of zero deals. That's where we're at. Let's give Scott a call. I'm sure he has many reactions of his own.

9:02Scott, how's it going? It's going really well, Ed. How about you? I'm doing well. I see you're in New York. I am in New York. That's right. You recognize my apartment, don't you? I recognize your background. I recognize your Grayson Perry on the wall. That's right. That's right. My only piece of art, Ed. One piece of art. It's a good one. Well, we want to get your take on this EU trade deal. A historic deal. apparently the biggest deal ever reached in any capacity. Those are the president's words. Your reaction, Scott? Well, first off, I'm curious what your thoughts are. Based on what I've read, this is a good deal for the U.S.

9:40and a bad deal for the EO. And that is, it looks like a lot of our, it looks like it's asymmetrically advantaged us in terms of tariffs. They're mostly opening their markets, keeping their markets the same or opening them further. And I was trying to figure out how we ended up in a place with a better deal than them, other than obviously the genius deal-making of the president. And I think it's a couple things. One, I think this is where it really hurts to have 27 member countries, that Europe is not really a union. And two, I think the elephant in the room, and Mia pointed this out, is the U.S.

10:17military umbrella, that the real existential threat of getting into a trade war with the United States is that it diminishes their ability to push back on the Russian army and Ukraine. And that also, I think that for the first time, America potentially leaving NATO and folding or collapsing the military umbrella that the EU has enjoyed is a real possibility. So I think for just market stability to get their businesses back to planning again to try and i would imagine part of this was a wink and a nod that america will continue to support the ukrainian army and also be a productive member or the base anchor of nato that they needed to get this deal done the net net as far as i can tell if this framework becomes an actual tariff deal is it'll raise prices on u.s households about 2400 dollars It's interesting, I guess our primary import from Europe is, I assumed it was Hermes scarves.

11:17It's not, it's pharmaceuticals. So our prices do go up, but this is just calling balls and strikes the way I see it, and I do want your opinion here. I feel like this is a win for Trump, that he got the better end of this deal as far as I read it. What are your thoughts, Ed? Well, I think a lot of people are saying that. And I got to be honest, I can't see any reason why. I mean, this is the same thing we've seen before. We're putting up a tariff. And as we all know, that tariff is a tax on us. Yes, it's going to lower demand on Europe's side of things. But ultimately, who are we taxing? We're taxing the people who import those products to America.

11:58We're taxing American companies. So that's America losing on that side. There's also the America losing in terms of prices going up. And then, again, we've got to get to the quid pro quo here. What did we get in return? Well, Europe's supposedly investing$600 billion in America. But if history's any guide, we've seen it with Japan and with China and Saudi Arabia, means absolutely nothing. And nothing's actually been signed here. And so I don't fully understand why people have decided to wake up this morning and say, oh, this one's legit. This one makes sense. This one's a win. It's a victory. Even the markets, I mean, perhaps they're gleaning that information from the market's reaction, but the market's reaction was very, very small.

12:41S &P closed maybe 0.2 % higher. That's basically flat these days. European market down 0.2%. I mean, in my view, that's not much of a reaction. So the way I see it, again, nothing's changed and we've gone over that. But I guess I would be interested in your thoughts on why people might be seeing this as something more substantial than anything we've seen before. perhaps because it's with the European Union and the tensions have been higher. I mean, what is it you think about this deal that people decided to say, okay, this one's a win. Japan was kind of a tie, but this one's a win for Trump. This does feel a little bit, Ed, that one of two things happened.

13:36Either the EU said, we're just going to play slow ball, agree to a framework. We need to get back to business. the chill here, the indecision is bad for everybody. And we'll work out the details and maybe throw up arms in frustration and never get to a deal waiting for a democratic Congress, or we got to placate this guy because we need arms to continue to flow into Ukraine. Otherwise, is Poland next? So it feels to me like the U.S., based on the framework I've sought, has got the better end of this deal. I would have thought the EU would have responded with equivalent reciprocal tariffs. And it doesn't look like that.

14:12It looks like our tariffs that we're managed and getting them, at least in terms of a framework to agree to, are greater than the tariffs that are going to be imposed on us. Well, perhaps Europe has realized that tariffs are a tax on themselves. I mean, this is another big piece of it. You sound like literally the physical embodiment of The Economist magazine. The Economist is saying, The Economist magazine has been saying for 40 years, the reason for Bising, the reason to try, that the kind of center of gravity for the economist is that free trade and free markets are the way to go. And I think you make a really solid argument.

14:46As a matter of fact, when I first saw this, I thought, oh, we're lowering tariffs on everyone. This is actually a free trade agreement. And I agree with you. But this is where we are. It felt like we're on the precipice of a trade war where we were going to implement 50%. He was threatening 30 % 50 % taxes, I thought they would have reciprocated with those taxes. And then we see economic growth just come to a standstill. And then the largest democracies in the world figure out a way to create openings for autocracies. So this whole framework, all of this bullshit, this nonsense probably should have never happened, right?

15:24And the really interesting analysis to your point will be, okay, who are the winners and losers versus a year ago? And I'm not sure we're going to come out with much different other than a huge erosion and goodwill towards us. Having said that, it's back to business. It does feel like the tariffs are a bit asymmetrically favored towards us. And I'd like to think, and I don't know if this was the case, I'd like to think that Trump said, give me a win here, give me a great press release, and I'll continue to ship arms into Ukraine and bear hug and talk about how much I love NATO. I don't know if that happened, but that is a big playing card.

16:05But the other thing, the first thing I thought of is that Europe is a union in name only. That when you have the prime minister of France coming out and saying, this is a terrible day, they can't even speak with one voice. And so it's not easy to have 27 member nations all with veto power trying to negotiate a deal like this. So net-net, given where we are, given a trade war that made no sense to begin with, I call this a lowercase win for the Trump administration. Even if it's a perceptual win here, Ed, I do think when you read this press release and 27 EU member nations or whatever it is have signed up to this framework, I think the Trump administration can legitimately say this was a win for them.

16:51Let me put it this way. I think, you know, the perception is the reality right now. And the perception is that our largest trading partner in the world has come to an agreement for a framework that on the face of it looks like it's asymmetrically tilted towards the U.S. We'll see what happens here. Yeah, we'll see. I don't think it is, but we will see. um thank you that's our little economist our little a little economist subscriber he just he's not having any of it it's it's those geniuses in brussels with their fondue i'll believe it when i see a deal i'll believe it when i see a deal that is signed and sealed that's ratified that's when i'll start to believe any of this but i'm not i'm not buying into these press releases we've seen them too many times that's a fair point all right thank you scott i'll see you tomorrow Take care, brother.

17:44After the break, Wall Street changes its tune on Nike. Stay with us.

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19:40We're back with ProfG Markets. Wall Street has officially turned bullish on Nike. A note from JP Morgan analysts upgraded the stock to a buy, telling investors to, quote, just buy it. JP Morgan boosted Nike's price target, predicting a share price of$93 by December of 2026. The bank also increased the outlook for the company's earnings per share in both fiscal years 2026 and 2027. And JP Morgan isn't alone. Goldman Sachs, Jeffries, and August have also upgraded the stock in recent weeks. Nike shares rose 3 % on yesterday's news, and the stock is now trading at its highest level in five months.

20:18So this has been a pretty great week for Nike, a pretty great month for Nike. And it's coming at a time when things have been, generally speaking, quite bad for the company. The stock fell 30 % last year. Revenue fell nearly 10%. Net profit fell nearly 50%. We also had this tariff drama, which is a big problem for a company that builds most of its products in China. They also had this management shakeup recently, which forced them to withdraw their guidance in a recent earnings report. That was a problem. They've had too much inventory. They've had weak demand, bad forecasting. We could go on forever.

20:55Things have not looked good for Nike. But it appears that something is beginning to change. Perhaps it's the new CEO, Elliot Hill. Perhaps it's market conditions. We're not exactly sure. But analysts on Wall Street are starting to take notice. So to understand what exactly is going on at Nike, our producer Claire spoke with Lorraine Hutchinson, a retail analyst at Bank of America. I think the biggest thing that's changed with Nike is we have a line of sight that the worst is behind us. So they've had a lot of struggles with putting out products that's way too lifestyle-focused. And they oversold a lot of these key franchises rather than innovating and launching new franchises.

21:39They had to clean that up under a new management team. And that's been really harmful to the sales and the earnings of the company. So now we've started to see some green shoots and signs that the worst of that is behind us. And I think that's caused investors to focus more on what could earnings look like as they come out of this really tough time. Would you say the stock has bottomed in that case? I think it has. We have a buy on the stock. We think the stock goes higher from here based on continued sequential trajectory in the sales and the margins. What would you say Elliott Hill, the CEO, is doing right?

22:16So Elliott Hill joined and diagnosed the problem very quickly. He looked and saw these three lifestyle styles as being much too high a percentage of total sales. And so he realized as the sell-through began to slow that Nike needed to exit a lot of that volume very quickly. They had started this before he took over as CEO, but they accelerated it dramatically. So what does that mean? It means clearing through some of the liable product that's already on the shelves. It means buying back some product from wholesale. It means really trying to clean up the inventory out of the wholesale channel and out of Nike's retail stores.

22:57That was really the first thing he did. He also reorganized the company back to focusing on sport instead of gender or product. It's now sport. So they're really very laser focused on their heritage of being a performance company. And that's been a big cultural change for Nike. That was Lorraine Hutchinson, retail analyst at Bank of America. Well, it'll be very interesting to see how this Nike story unfolds. As we've said, the past few years have been incredibly rough. Back in 2021, the stock was at an all-time high. The company was worth nearly$300 billion. Since then, the stock's been more than cut in half.

23:37We're looking at a market cap right now of less than$120 billion. And a lot of that failure was blamed on the former CEO, John Donohoe, who tried to lead this digital transformation of Nike, investing in tech and e-commerce and even crypto, even NFTs, which kind of seemed exciting at the time. But ultimately, it came at the expense of the things that make Nike Nike, things like brand, product quality, wholesale partnerships, etc. So when John Donahoe stepped down as CEO and Elliot Hill, the former Nike exec, took over, the idea was that Elliott would bring the company back to its roots, that he would focus on the things that made Nike great.

24:17And that was a big piece of why Scott became bullish on Nike back in October of last year. This was part of Scott's fallen angel thesis, this idea that these once iconic companies, not just Nike, but also Intel, Disney, Estee Lauder, that those companies whose stocks had gotten battered in recent years would rediscover their roots and return to a valuation that more accurately reflected their iconic status in American culture, which as of the beginning of this year, they certainly didn't. That was the thesis at least. Well, it would appear that it might be beginning to materialize. Nike, as Lorraine pointed out, is starting to turn things around.

24:57Major banks are now upgrading the stock. And despite this massive tariff exposure, Nike shares are up 8 % year to date. As for the other fallen angels, Intel has underperformed. It's up around 2.5 % year-to-date. Disney's done better, up 9%. But the biggest winner, to Scott's credit, has been Estee Lauder, which has risen 25 % in 2025. That is roughly the same return as Nvidia. So is 2025 the year that the fallen angels rise up again? Well, if sentiment towards Nike, our original angel, is any indication, it would seem that a comeback is underway.

25:41Anthropic is chasing a blockbuster valuation. The AI startup is reportedly in talks to raise funding at a valuation north of$150 billion. That is more than double its$61.5 billion valuation from earlier this year, and it would make it the third most valuable startup in the world. This comes as the company's annual recurring revenue has quadrupled to$4 billion since the beginning of the year, fueled by enterprise subscriptions and its coding assistant, Claude Code. Now, the startup world is understandably very excited about this valuation, about what it says about Anthropic, and also what it says about the future of AI in general.

26:21And that is totally fair, and we agree. However, the more interesting story here isn't the jump in valuation. The more interesting story here is who's investing. According to the Financial Times, Anthropic has been holding talks with MGX, which is the government-owned investment fund of the United Arab Emirates, which on its face isn't that interesting. Everyone's raising money in the Gulf these days. But it is more interesting when you realize that as of last year, Anthropic made it a point that they would never raise money from the Middle East. According to the CEO, quote,