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Clash of titans: GSIB proposal pits megabank against megabank

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Clash of titans: GSIB proposal pits megabank against megabank



  • Key takeaway: JPMorganChase and Bank of America objected to the proposed removal of risk-weighted assets from the denominator of the short-term wholesale funding component of the GSIB surcharge, arguing the change could distort how regulators measure a bank’s reliance on short-term wholesale funding. 
  • Expert quote: “The removal of the [short-term wholesale funding] denominator causes the proposal to affect firms unevenly. Utilizing gross STWF with no denominator may overstate risk for a larger firm with lower relative reliance on STWF.” — Alastair Borthwick, chief financial officer at Bank of America.
  • What’s at stake: Despite disagreements over certain aspects of the GSIB and Basel III proposals, banks urged prudential regulators to move quickly to finalize the rules.

The nation’s largest banks are divided over proposed changes to the Federal Reserve’s capital surcharge proposal for global systemically important banks, with one of the biggest disagreements centered on how regulators calculate short-term wholesale funding. 

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In separate comment letters submitted June 18, JPMorganChase and Bank of America said the central bank did not provide sufficient justification for removing risk-weighted assets from the denominator of the short-term wholesale funding component of the GSIB surcharge. The banks argued the change could distort how reliance on short-term wholesale funding is measured and produce uneven outcomes across the largest U.S. banks. “The removal of the STWF denominator causes the proposal to affect firms unevenly,” wrote Alastair Borthwick, chief financial officer at Bank of America. “Utilizing gross STWF with no denominator may overstate risk for a larger firm with lower relative reliance on STWF.”

The concerns were not shared by the nation’s two largest investment banks. Goldman Sachs and Morgan Stanley, in their own separate comment letters, backed the proposed revisions, arguing the changes would improve the accuracy of the GSIB surcharge by better aligning the short-term wholesale funding measure.

The commentary letter from Goldman Sachs argues that the legacy methodology pairs two unrelated measures and therefore fails to accurately assess a bank’s reliance on short-term wholesale funding.

“Because there is no correlation between STWF and [risk-weighted assets], retaining RWA in the denominator would cause the STWF indicator to drift out of balance over time,” Goldman Sachs’ commentary reads. “Eliminating RWA from the denominator would result in a more transparent and economically grounded measure of reliance on STWF.”

The comment letters came in response to a package of proposed rules released in March by U.S. banking regulators aimed at revising capital requirements. The proposals include changes to the implementation of remaining Basel III standards, revisions to the GSIB surcharge framework and updates to the standardized approach for calculating regulatory capital requirements. 

While Bank of America acknowledged that the GSIB surcharge calculation could be improved, it argued that removing the denominator without replacing it could disadvantage certain firms. Bank of America suggested replacing risk-weighted assets with adjusted average assets, saying the alternative would produce “more consistent results across firms.” Chase argued for keeping the risk-weighted assets denominator, saying the methodology change could require GSIBs to hold more capital against short-term wholesale funding and increase costs for consumers through higher capital requirements. Despite their differences over the STWF calculation, all four banks urged the Fed to update its Method 2 GSIB surcharge formula to account for economic growth and inflation since the framework was established. 

“Absent such adjustments, firms may be penalized for balance sheet growth that merely reflects broader economic expansion rather than an increase in systemic footprint,” Goldman Sachs wrote in its letter.

Some analysts expect regulators to maintain most of the proposed changes to GSIB and Basel III, while making some targeted changes in response to industry feedback.

One potential change could involve the definition of “commitment” in the Basel III proposal. Banks have argued the revised definition is too broad and creates uncertainty over which potential lending arrangements require additional capital.

A joint letter from banking trade groups, including the Bank Policy Institute and the American Bankers Association, said the proposed definition “introduces substantial ambiguity and increases the likelihood of inconsistent application across firms.”

The change could have varying effects across the banking industry. Large banks could face higher capital requirements because of an expanded risk base, while midsize banks could see effects through the standard leverage ratio. Smaller banks could also face additional reporting requirements under the broader definition.

Though there are divisions over certain elements of the proposal, banks have generally supported the GSIB surcharge and Basel III endgame changes, viewing them as a significant improvement over former Federal Reserve Vice Chair for Supervision Michael Barr’s 2023 proposal. Bank comment letters urged regulators to move quickly toward finalizing the rules. 

“We went from huge issues of mid to high teens capital increase to now we’re arguing over the wording of things on the margin,” said Ed Mills, a managing director at Raymond James in a previous interview. “That shows you how far this has come.”



Why Now Could Be the Best Market For Real Estate Investing in Over a Decade

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Both active and passive real estate investors have pulled back over the last year. For example, Redfin reported that mom-and-pop investors pulled back by 6% late last year and 13% for condo investments.  

Anecdotally, I’ve heard this from professional real estate operators as well. I talk to at least a couple every week, and for several years now, they’ve said the same thing: “It’s really hard to raise capital from individual investors right now.”

But here’s the thing about retail investors: Because they invest based on “vibes” and headlines, they only start investing well after a recovery. They wait until the headlines are all hunky-dory again, and after assets have been performing well for a while. By then, they’ve missed out on the best opportunities. 

Don’t take my word for it. Dalbar has studied this for decades, pointing out how retail stock investors consistently underperform the market at large. Over a 20-year period, the S&P 500 earned an average annual return of 8.2%, while the average retail investor earned a quarter of that at 2.1%. 

Here’s why you should rethink everything you “know” about today’s real estate market and start investing slowly and steadily in real estate every month as I do. 

The Post-Crash Multifamily Recovery Is Still Early

Apartment property prices crashed 25%-30% in 2022, after interest rates and cap rates shot through the roof. They’ve since started recovering but remain in the early stages of that recovery. 

Check out Freddie Mac’s Apartment Investment Market Index (AIMI).

Everyone (myself included) assumed that recovery would go faster after prices hit bottom in late 2022-early 2023. But cap rates move in near-lockstep with interest rates, and persistent inflation has kept rates higher for longer. 

That leaves plenty of room for improving prices over the next few years. 

Institutional Investors Are Moving More Money Into Real Estate

Seeing that recovery underway, large investment firms poured $216 billion into apartment buildings, industrial, retail, and other commercial real estate in the first quarter of 2026. Globally, that’s an 18% increase over last year, and North America saw a 25% jump in investment. 

What do they know that you don’t? 

A lot, actually. They have access to world-class data from private firms—and entire teams of professionals whose full-time job is to analyze risk. 

Returning to the stock analogy, this is why active fund managers still outperform individual investors, even if they don’t consistently outperform benchmarks like the S&P 500. 

Higher Cap Rates and Bang for Investors’ Buck

Higher cap rates mean lower property prices per dollar of income. That’s bad news for sellers but great news for buyers. 

Sure, higher interest rates throttle cash flow today, at least for investors who finance a huge portion of the purchase. But as they say, you marry the property but date the rate. Investors can refinance when rates move lower, but they buy in based on today’s (relatively) high cap rates.

That sets you up for supercharged cash flow as rents rise and your loan payments potentially fall.

Distressed Sellers

Investors score the best deals from distressed sellers. And those lingering high cap rates and interest rates have left plenty of distressed multifamily operators. 

High cap rates have put many operators who bought from 2020 to 2023 upside down on their properties. They can’t sell, and they can’t refinance without bringing huge amounts of cash to the table—which they don’t have. 

Plus, high interest rates have left many people who took out floating-rate loans with negative cash flow. Many have defaulted on their loans and are being forced to sell at steep discounts. 

That’s no fun for them. But it’s great for us as investors buying in today. 

New Rental Construction Is Falling

An excess of new rental supply has sent rents falling in much of the country, especially the Sunbelt. 

That imbalance of supply and demand is shifting. Permits for new apartment construction have fallen from 761,000 in early 2023 to 491,000 in April. That’s a 35% drop. 

It takes time for markets to absorb a supply glut, but many are in the process of doing so in mid-2026. Sure enough, you can see it in the surging apartment vacancy rate over the last few years, hitting a peak in early 2026 and starting to decline again. 

 

More Conservative Underwriting

In the years leading up to 2022, many real estate investors played fast and loose with underwriting. They borrowed short-term, floating-rate mortgages and projected huge rent growth and modest expense growth. 

Those operators have since gone out of business. Those who survived learned some expensive lessons. 

Investors today use more conservative financing and underwriting. They have to, with rents stalling and even declining year over year, and the surge in property taxes and insurance between 2023 and 2025.

For passive investors, that means safer investments than those available a few years ago. Often, we see investments paying 8% distributions immediately, between the high cap rates and operators pursuing low-risk, high-cash-flow properties that are already performing well today. No major renovations or rent hikes are required—just strong cash flow based on today’s rents. 

Better Terms for Passive Investors

Because many operators have had trouble raising capital over the last couple of years, they’ve had to offer better terms to attract investors, like higher preferred returns and better profit splits. We see this all the time in my co-investing club, with more operators offering 8%-10% preferred returns and 70/30 or 80/20 profit splits instead of 60/40. 

How I’m Investing Today

Don’t get me wrong: I’m not suggesting you try to time the market. Quite the opposite, in fact. 

I practice dollar-cost averaging with my real estate investments, investing $2,500 or $5,000 every month. I go in on these investments with a co-investing club, where we all split the minimum investment so we can each invest less. 

Too many individual investors look at recent returns and headlines, letting emotion dictate their investments. Look at the big picture instead: Markets go through cycles, but those cycles aren’t always predictable. If you keep investing month in and month out, however, you’ll come out ahead of all those nail-biters sitting on the sidelines.

I do try to invest in recession-resilient real estate, however. Shocks happen, and I don’t want my portfolio melting in the next rainstorm.  

Rather than trying to time the market or pick the next hot asset class, I invest passively in deals all over the country. I invest in many different property types, from single-family to multifamily, mobile home parks to industrial, and raw land to ground-up construction. In fact, my co-investing club just vetted our first international deal, in Canada. 

Some investments will inevitably underperform. Others will overperform. Most will fall in the middle of the bell curve. That broad exposure is precisely what helps me sleep at night. 

Prediction: This Artificial Intelligence (AI) Semiconductor Stock Will Join the $1 Trillion Club by 2028

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Prediction: This Artificial Intelligence (AI) Semiconductor Stock Will Join the $1 Trillion Club by 2028


There are currently 16 companies that have crossed the $1 trillion market cap plateau, with two more, Walmart and JPMorgan Chase, knocking on the door.

One of the next artificial intelligence (AI) stocks to reach $1 trillion in market cap should be the Dutch semiconductor company ASML (ASML 2.14%).

Currently, ASML is the world’s 20th-largest company, with a market cap of about $693 billion. Based on its rapid growth rate over the past five years or so, it should reach $1 trillion sometime in 2028.

ASML, which makes the lithography equipment used to manufacture semiconductors and chips, has been growing rapidly during the artificial intelligence boom. While it’s not a chip foundry like Taiwan Semiconductor, it has a competitive advantage similar to Taiwan Semiconductor.

Image source: Getty Images.

ASML is the dominant leader in its space, with a market share of roughly 90%. It is also agnostic in that its equipment is used by all the major chipmakers, including Taiwan Semiconductor, and it does not compete with any of them as a chipmaker itself.

Plus, its extreme ultraviolet (EUV) lithography machines are cutting-edge and sought after by the leading foundries and chipmakers, such as Samsung Electronics, Taiwan Semiconductor, Intel, Micron, and SK Hynix, among others. Some analysts suggest that its competitors would need 10 years and an investment of more than $100 billion to simply catch up to its technology advantages. That’s a huge leg up on the competition.

The total addressable market for chips is expected to be more than $1 trillion in 2030, and the company anticipates revenue of between $50 billion and $68 billion by 2030 — or 44 billion to 60 billion euros. But some analysts, like Bank of America, think revenue could reach $83 billion by 2030, or 73 billion euros.

Will it join the $1 trillion club by 2028?

ASML Stock Quote

Today’s Change

(-2.14%) $-39.32

Current Price

$1801.86

At the end of fiscal 2025, ASML generated 32.7 billion euros in net sales, around $37 billion. That’s a roughly 15% growth rate from $32 billion in 2024.

A 15% growth rate over the next five years would easily put ASML’s net sales at about $75 billion by the end of 2030 — more than double its current total. That’s probably what BofA is thinking in its projections.

Given the explosion in AI and its huge competitive advantages, I do not see ASML’s growth rate slowing down — if anything, it may increase.

So, if you look at how the market cap has grown over the past five years during the initial AI boom, it is not out of the realm of possibility that ASML could hit $1 trillion in market cap in two years.

In July of 2021, ASML’s market cap was $288 billion, so it has grown at a 19% annualized clip over the past five years. If it averages 19% growth over the next two years as of June 25, the market cap would be roughly $980 billion. So, by the end of calendar year 2028, it would likely surpass $1 trillion and be, perhaps, the 20th company to join the club.

Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Dave Kovaleski has positions in Micron Technology. The Motley Fool has positions in and recommends ASML, Intel, JPMorgan Chase, Micron Technology, Taiwan Semiconductor Manufacturing, and Walmart. The Motley Fool has a disclosure policy.

The MLC rejects Pandora’s bid to use a horse racing ruling against the mechanical royalties lawsuit

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The Mechanical Licensing Collective has rejected Pandora‘s attempt to use a federal appeals court ruling on horse racing regulation to undermine the collective’s authority to sue the streaming service over mechanical royalties.

In a filing on Wednesday (June 24) in the US District Court for the Middle District of Tennessee, the MLC called the cited ruling “inapposite” and said it “does not advance Pandora’s argument.”

The response came one week after Pandora filed a notice of supplemental authority citing a June 11 decision by the US Court of Appeals for the Fifth Circuit, which found that the enforcement provisions of a federal horseracing law violated the private nondelegation doctrine.

That doctrine restricts Congress‘s ability to hand government enforcement powers to private entities without supervision from a federal agency.

Pandora contends that the same reasoning applies to the MLC – a private, government-designated body created under the Music Modernization Act of 2018 – which can investigate licensees and pursue them in court without sign-off from a government agency.

But the MLC argued that Pandora has forfeited its constitutional challenge by raising it too late in the proceedings.

“Pandora forfeited its constitutional arguments when it chose not to assert them at the outset and instead litigated this action for two years through discovery without once raising them,” the MLC said in its filing.

The collective also argued that it operates under sufficient government oversight to satisfy the nondelegation standard, stating that the MLC and “the individual voting members of its board of directors are appointed and removable by a department head (the Librarian of Congress) and are subject to pervasive oversight by the Librarian and the Register of Copyrights.”

On the substance of the horseracing ruling, the MLC raised three objections.

First, the collective noted that the Fifth Circuit‘s decision does not apply a different legal standard from the one articulated by the Sixth Circuit in Oklahoma v. United States – which is the binding authority in the Middle District of Tennessee, where the Pandora case sits.

Second, the Fifth Circuit‘s specific conclusion that the Horseracing Integrity and Safety Act (HISA) enforcement provisions are unconstitutional “directly conflicts” with the Sixth Circuit‘s conclusion to the contrary.

Pandora itself acknowledged this in its filing, conceding that the Fifth Circuit “expressly parted ways with the Sixth Circuit.”

Third, the MLC argued that the horseracing law’s structure is fundamentally different from the Music Modernization Act.

The MLC said the MMA “fully lacks HISA’s ‘clear delineation’” of enforcement functions, and instead “grants The MLC broad authority to engage in activities concerning the Blanket License, including enforcement, and also grants the agency broad oversight that encompasses The MLC and the entire statutory regime.”

“In sum, Black does not provide Pandora with an escape from the liability that is established in the summary judgment papers,” the MLC said.

The case dates to February 2024, when the MLC sued Pandora in the US District Court for the Middle District of Tennessee, alleging that the company underpaid mechanical royalties on its ad-supported Pandora Free tier.

Both parties filed competing motions for summary judgment in February 2026, each asking Judge Eli J. Richardson to rule in its favor.

In opposition briefs filed in March, the MLC called Pandora‘s constitutional argument “desperate and unfounded.”

The underlying question in the case remains whether Pandora Free qualifies as an “interactive service” under the Copyright Act, which would make it subject to mechanical royalties on all of its streams.

The MLC argues that on-demand listening, unlimited skips and replays, and personalized programming each place the service in that category.

A spokesperson for the MLC told MBW in March that the evidence “confirms that Pandora Free is an ‘interactive service’ and that Pandora has improperly underpaid royalties due to copyright owners under the Blanket License.”

Pandora counters that its free tier operates as noninteractive internet radio, and that its Premium Access sessions, 30-minute windows that free users can unlock after watching a video ad, are licensed separately.

Pandora‘s constitutional argument tracks a separate fight involving its own parent company.

In August 2025, Judge Naomi Reice Buchwald of the US District Court for the Southern District of New York dismissed a lawsuit brought by SoundExchange against SiriusXM, Pandora‘s parent, finding that Section 114 of the Copyright Act does not authorize SoundExchange to litigate royalty disputes.

That ruling turned on statutory interpretation rather than the Constitution, and Buchwald noted that the MLC‘s governing statute, Section 115, expressly grants the collective the power to bring a federal court action.

SoundExchange is appealing the decision.

A ruling from Judge Richardson on the summary judgment motions is pending.Music Business Worldwide

Amex Delta Business Upgrade Offers: Earn Up to 60K Bonus Miles

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Amex Delta Business Upgrade Offers: Earn Up to 60K Bonus Miles


Amex Delta Business Upgrade Offers

American Express has Delta Business cards upgrade offers that can get you up to 60,000 bonus SkyMiles. If you’re eligible, you can upgrade your existing card to a higher-tier Delta Business card and receive a bonus after meeting the required spending requirement.

Before upgrading, it’s important to compare the offer with applying for a new card. Upgrade offers generally don’t involve a new credit inquiry and let you keep your existing account history, but they also make you ineligible for a new card welcome bonus on that product if you haven’t had it before. Let’s see these two offers.

Delta SkyMiles® Platinum Business Card

  • Upgrade to the Delta SkyMiles® Platinum Business Card to earn 50,000 Bonus Miles after you spend $8,000 in purchases on the Card in the first 6 months of Card Membership.
  • $350 Annual Fee
  • UPGRADE OFFER LINK

Delta SkyMiles® Reserve Business Card

  • Upgrade to the Delta SkyMiles® Reserve Business Card to earn 60,000 Bonus Miles after you spend $12,000 in purchases on the Card in the first 6 months of Card Membership.
  • $650 Annual Fee
  • UPGRADE OFFER LINK

Things to Know

When you upgrade your card, American Express will typically charge a prorated annual fee based on the time remaining in your current cardmember year. If you’ve already paid the annual fee on your existing card, you’ll usually receive a prorated credit for the unused portion and then be charged the prorated fee for the upgraded card.

Also keep in mind that American Express requires you to keep the upgraded card for at least 12 months after accepting the upgrade offer. Downgrading or canceling the card before then could result in the bonus being clawed back and may violate the terms of the upgrade offer.

Guru’s Wrap-up

These are solid upgrade offers, especially for cardholders who don’t qualify for a welcome bonus on a new Delta Business card. Just make sure the additional annual fee and premium benefits make sense for your spending and travel habits. 

HT: Parts_Unknown

INTRO TO FINANCIAL MANAGEMENT – THE THREE KEY DECISIONS (PART 1)

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INTRO TO FINANCIAL MANAGEMENT – THE THREE KEY DECISIONS (PART 1)



This video explains the concept of financial management and the three key decisions of financial management.

source

Florida Could Bar Undocumented Students From Public Universities Starting in 2027

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Florida Could Bar Undocumented Students From Public Universities Starting in 2027


  • Florida is moving to block undocumented students from its public universities, colleges, and adult-ed programs starting in 2027.

    • Florida is advancing a series of rules that would block undocumented students from enrolling in the state’s public higher education system — first at its selective universities, and potentially at its community colleges and adult education programs too.

    This comes from a set of proposals that would take effect in the 2027-28 academic year if approved.

    Would you like to save this?

    We’ll email this article to you, so you can come back to it later!

    Driving The News

    The State University System of Florida’s Board of Governors voted Thursday to advance a proposed admissions rule (Regulation 6.001) that would bar students “present in the United States unlawfully” from any university that did not admit all academically qualified applicants in the two most recent years.

    Because all 12 of the system’s campuses use selective admissions, the change would function as a near-total ban.

    The proposal now enters a 14-day public comment period before returning to the full board for a final vote. If approved, it takes effect for the 2027–28 academic year. Students currently enrolled would not be affected.

    The Bigger Picture

    A separate set of rules from the Florida Department of Education (FLDOE) would extend the restrictions further down. Proposed rule 6A-10.0240 would prevent undocumented students from attending the 28 colleges in the Florida College System, and proposed rule 6A-6.014 would block them from adult general education programs, where enrollment starts at age 16.

    By The Numbers

    The Florida Policy Institute (FPI) estimates the college-system rule alone could cost Florida’s public colleges roughly $15 million a year in lost tuition and fees. The biggest projected losses fall on:

    • Miami Dade College — about $1.8 million
    • Broward College — about $1.18 million
    • Palm Beach State College — about $1.06 million
    • Florida SouthWestern State College — about $825,000

    FPI built its estimate using the number of students who received the state’s “tuition fairness” waiver (repealed last year) as a proxy for undocumented enrollment, then multiplied by each college’s in-state tuition rate.

    Florida has one of the largest populations of undocumented college students in the country, with one report estimating roughly 40,000 attended the state’s colleges in 2021.

    How This Connects

    Florida’s push follows a broader rollback of benefits for undocumented students. Last July, the state repealed a policy that let certain undocumented students pay in-state tuition rates.

    As The College Investor has covered in its work on state residency requirements and Florida college costs, where a student is considered a resident can swing the cost of a degree by tens of thousands of dollars, and these rule changes would remove the public-college option for affected students entirely.

    Watch for the Board of Governors’ final vote, expected after the comment period, and for the FLDOE rules to move through their own approval process. If adopted, both sets of rules would reshape who can access Florida’s public colleges starting in 2027.

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    Home listings drop 1.7% to lowest level since February

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    Differences across metro areas

    The national figures also mask sharp differences across major metro areas. Among the 50 most populous U.S. metros, San Francisco posted the largest year-over-year increase in median sale price (11.5%), followed by Detroit (9.7%), West Palm Beach, Florida (9%), Pittsburgh (8.7%), and St. Louis (8.5%).

    Median sale prices declined in eight metros. The largest drops were in San Jose, California (-6.2%), Seattle (-4.8%), Portland, Oregon (-2.8%), Dallas (-1.8%), and Orlando, Florida (-1.5%).

    Pending sales rose the most in West Palm Beach, Florida (21.5%), San Francisco (17.9%), Austin, Texas (15%), Milwaukee (14.8%), and Boston (11.1%). They declined in five metros, led by Houston (-12.7%) and Seattle (-12%).

    New listings increased the most in Philadelphia (16.3%), St. Louis (11.2%), Boston (10.8%), Pittsburgh (10.5%), and Montgomery County, Pennsylvania (9.6%). Meanwhile, the largest declines were in Dallas (-12.7%), Riverside, California (-6.8%), Fort Worth, Texas (-6.7%), Jacksonville, Florida (-6.3%), and Atlanta (-5.4%).

    Markets feel relief as US and Iran agree to a ceasefire on their increasingly violent ‘ceasefire’

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    Markets feel relief as US and Iran agree to a ceasefire on their increasingly violent ‘ceasefire’



    Stock futures rallied on Sunday evening after the U.S. and Iran appeared to step back from a weekend of escalating violence in the Persian Gulf.

    Futures tied to the Dow Jones industrial average rose 101 points, or 0.19%. S&P 500 futures were up 0.45%, and Nasdaq futures jumped 0.64%.

    But energy markets were still spooked as any fighting around the Strait of Hormuz threatens the nascent recovery in ship traffic through the vital chokepoint.

    U.S. oil futures climbed 1.5% to $70.29 a barrel, and Brent crude rallied 1.1% to $72.80.

    Sources told Axios that both sides agreed to halt attacks on each other and meet in Qatar on Tuesday to resolve differences over the Strait of Hormuz.

    Earlier on Sunday, Iran launched new attacks on Kuwait and Bahrain, while threatening a “complete halt” to peace talks. It continuined a tit-for-tat cycle of retaliation after U.S. airstrikes punished the regime for targeting commercial ships with drones.

    The renewed skirmishes came as Iran seeks to shut down an alternate route through the strait that’s protected by the U.S. and bypasses a Tehran-backed channel meant to normalize its control over the narrow waterway.

    President Donald Trump accused Iran of violating the two-week-old ceasefire deal and lobbed more of his signature apocalyptic threats, though he has also signaled reluctance to restart all-out war.

    “There may come a point when we are no longer able to be reasonable, and will be forced to militarily complete the job that we very successfully started,” he wrote on Truth Social. “If that happens, the Islamic Republic of Iran will no longer exist!”

    For now, the U.S. Navy appears to be making of a point of showing that the alternate route is still safe, as Gulf traffic data Sunday revealed a convoy of tankers heading through the strait under escort with their transponders turned on.

    But Iran observers noted the regime was forcing the U.S. into an escalation trap over the Strait of Hormuz that could lead to more war.

    “For the US, the fact that the Oman route might be blocked presents it with a big ultimatum: either the US escalates or gives IRGC control of the Strait of Hormuz. Logic says there’s no way that would happen, so escalation will continue,” HFI Research posted on X.

    For its part, Tehran isn’t budging from its position that control over the strait rests with Iran. Earlier this month, it created the Persian Gulf Strait Authority and suggested ships would have to pay fees to cross Hormuz.

    Foreign Minister Abbas Araghchi claimed on Sunday that the memorandum of understanding the U.S. and Iran signed gives the regime the exclusive right to manage traffic.

    “The management and full restoration of maritime traffic in the Strait of Hormuz is Iran’s responsibility,” he said, according to state media. “No other country or entity has any responsibility or authority in this matter.”

    Meanwhile, investors are looking for rebound in a holiday-shortened week after tech stocks led a deep selloff last week.

    With the U.S. observing Independence Day on Friday July 3, the Labor Department’s monthly jobs report will come on Thursday, a day earlier than usual.

    Wall Street expects June payrolls to increase by 118,000, down from May’s gain of 172,000, and for the unemployment rate to remain steady at 4.3%.

    How Leaders Engineer Margin Resilience

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    How Leaders Engineer Margin Resilience



    By Gregory Daco and Josh Putnam

    Volatility used to be episodic. Today it is structural. Inflation shocks, geopolitics, capital market repricing, and shifting supply chains no longer arrive as surprises—they define the operating environment.

    Yet while many companies see margins erode amid uncertainty, a small group consistently pulls ahead. Their advantage is not timing, luck, or scale. It is design.

    New research analyzing more than 1,000 U.S. companies over multiple economic cycles reveals a sobering truth: Only about 10% consistently deliver top‑quartile margins. Even more striking, these companies sustain margin leadership across downturns, rate resets, and geopolitical shocks. While most companies treat margin pressure as temporary, these leaders treat margin resilience as a core feature of their business strategy.

    The implication for executives is clear: Margin performance is no longer a financial outcome—it is a strategic choice.

    The Strategic Architecture of Margin Leaders

    Only the top 10% of public companies have consistently delivered EBITDA margins that outperform their industry peers, EY‑Parthenon analysis shows. Top performers sustain structurally higher margins year after year, even during periods of macroeconomic and geopolitical stress. By contrast, lower performers experience sharp margin compression during shocks and fail to recover fully.

    EBITDA margin evolution for assessed cohort of U.S. public companies (2010–2024)


    This divergence isn’t explained by industry mix alone. Margin leaders are found across sectors, whether industrials, consumer products, technology, or financial services. What distinguishes margin leaders is a shared strategic DNA built around five common reinforcing principles:

    1. Low capital intensity and high asset productivity. Margin leaders generate more profit per dollar of capital deployed. By minimizing fixed‑asset drag and optimizing working capital, they preserve flexibility when markets reprice risk.

    2. Recurring revenue and customer lock‑in. These firms prioritize business models that smooth revenue volatility—subscriptions, long‑term contracts, and embedded services—reducing sensitivity to short‑term demand swings.

    3. Pricing power through differentiation. Rather than competing on volume, leaders invest in defensible differentiation that allows them to pass through cost increases without destroying demand.

    4. Operational discipline that protects growth margins. Scale efficiency matters, but only when paired with rigorous cost governance. Margin leaders avoid “growth at any price” traps that dilute profitability.

    5. Active portfolio management. Margin leaders continuously reallocate capital, divesting subscale or margin‑dilutive assets while doubling down on advantaged businesses.

    Importantly, these levers are mutually reinforcing. Pricing power is unsustainable without differentiation. Recurring revenue loses value without operational discipline. Margin leadership is systemic, not siloed.

    How Markets Reward Strategic Clarity

    Equity markets price uncertainty in real time. Nowhere is that clearer than during macroeconomic and geopolitical inflection points.

    A recent EY-Parthenon analysis of daily S&P 500 returns from 1981 through 2025 reveals how markets reward transparency and penalize ambiguity. The excess return of equities over safer assets plunges in times of geopolitical stress and rises when there’s greater clarity following macroeconomic and U.S. Federal Reserve policy announcements.

    Equity markets penalize ambiguity, reward transparency


    Source: EY‑Parthenon analysis of nearly 45 years of S&P 500 data, Sep 1981–Oct 2025, measuring the equity premium as the excess return over the three-month Treasury bill.

    Market reactions to macroeconomic announcements, Federal Reserve decisions, and geopolitical shocks show a consistent pattern: Companies with clear, resilient margin profiles experience less valuation volatility, while structurally weaker firms face sharper repricing.

    For executives, this principle reframes margin resilience as a capital markets issue, not just an operating one. Transparency around how enterprises protect, sustain, and grow margins has become central to valuation credibility, transaction readiness, and investor confidence.

    Margins Are a Leadership Test

    The findings of this analysis challenge a deeply held assumption in many boardrooms: that margins will normalize when conditions stabilize. The data suggests the opposite. In structurally volatile markets, margin leaders pull further ahead while laggards fall into persistent underperformance cycles.

    This creates a stark choice for leadership teams. Either margins are treated as just another financial metric, managed reactively through cost cuts and one‑off initiatives, or they are designed deliberately through strategic architecture.

    The latter requires uncomfortable trade‑offs: walking away from capital‑heavy growth, sunsetting legacy offerings, and resisting price‑led competition. But the payoff is not just higher margins—it is resilience, valuation stability, and strategic freedom.

    Four Actions to Take Now

    To move from margin defense to margin leadership, leaders should focus on four priorities:

    1. Audit margin drivers structurally, not tactically. Go beyond cost reviews. Identify which parts of the business structurally earn returns above the cost of capital—and which never will.

    2. Embed pricing power into strategy, not negotiations. Invest in differentiation, data, and value communication that allow proactive pricing decisions.

    3. Redesign portfolios for resilience, not scale. Actively rotate capital toward businesses with recurring revenue, lower capital intensity, and defensible economics—even if it slows top‑line growth.

    4. Align leadership incentives with margin quality, not just growth. Reward sustained profitability, not volume expansion that erodes long‑term returns.

    Gregory Daco is the EY-Parthenon Chief Economist.

    Josh Putnam is the EY-Parthenon Global and Americas Corporate Finance Leader.

    Click here to access the full EY-Parthenon analysis on margin resilience.

    The views reflected in this article are the views of the authors and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

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