March 25, 2025
Policy risk is doing more of the work now
If you’re preparing for investment banking interviews, don’t treat macro headlines as background noise. This week’s market setup is a good reminder that policy choices are moving directly into revenue models, valuation assumptions, and deal logic.
The cleanest examples are in Europe. The EU is pushing a €150 billion defense funding program that excludes defense companies from the U.S., U.K., and Turkey unless those countries sign new defense and security pacts with the EU. At the same time, the European Commission is trying to reduce steel imports by 15% to protect domestic producers from global oversupply and cheaper imports.
That’s not just geopolitics. It’s a supply chain, procurement, and margin story. It affects which companies can bid on major contracts, which manufacturers can scale, and which regions may benefit from a forced shift in capital spending.
The EU defense move is a procurement story, not just a political one
The EU’s rearmament push is being framed around reduced U.S. support for Ukraine’s war effort and President Donald Trump’s position that Europe does not contribute enough defense spending to NATO. The practical consequence is more important for finance students: defense procurement rules are changing.
Advanced weapons systems from excluded countries, including systems like the U.S. Patriot air and missile defense platform manufactured by RTX and others, would be barred unless new defense pacts are signed. That creates a real business risk for non-EU contractors and a potential tailwind for European defense manufacturers.
France has pushed for a “Buy European” approach, and this policy direction fits that broader theme. The U.K. is in a more complicated position because British defense companies such as BAE Systems and Babcock International are deeply integrated into the European defense industry. So the question isn’t simply, “Will Europe spend more on defense?” The better question is, “Who is allowed to capture that spending?”
That distinction matters in interviews. If you’re asked about defense, don’t stop at “defense budgets are rising.” A stronger answer talks about addressable market access, domestic procurement preferences, and whether U.S. primes could see slower growth in Europe if exclusionary rules stick.
How to talk about it like a banker
- Revenue opportunity: EU manufacturers may benefit if spending is redirected toward domestic suppliers.
- Contract risk: U.S., U.K., and Turkish defense companies face uncertainty unless security pacts are signed.
- M&A angle: European defense assets with specialized capabilities may become more strategically valuable if local sourcing becomes a priority.
- Valuation angle: Higher expected defense spending can support higher forward revenue assumptions, but only for companies with access to the funding pool.
Steel is another example of policy becoming margin protection
The EU is also reinforcing short-term measures to protect its steel industry while maintaining longer-term support for competitiveness. The goal is to cut steel imports by 15% amid global oversupply.
The backdrop is ugly for European steelmakers. They’re dealing with high energy prices, competition from cheaper imports, and uncertainty tied to the Russia-Ukraine conflict. China is a major source of pressure. Global steel overcapacity is estimated at almost five times the EU’s annual steel consumption, which gives you a sense of how hard it is for domestic producers to defend pricing without policy support.
There’s also a U.S. tariff angle. Analysts have warned that tariffs from the Trump administration could increase exports into Europe, adding more pressure to the region’s steel market. For Germany’s heavy industrial economy, the stakes are high: major European steel companies, especially in Germany, have been cutting more than 11,000 jobs to improve competitiveness.
For interviews, this is a nice way to show that tariffs can have second-order effects. A tariff aimed at one market can redirect supply into another. That can depress prices, pressure margins, and force policymakers to respond.
The Fed is still patient, but the inflation story got messier
The Federal Reserve kept interest rates at the 4.25% to 4.5% range for the second consecutive time and revised its outlook toward higher inflation and lower growth. The important nuance is that new tariff measures are now being considered as a factor in higher inflation expectations.
The Fed still appeared unconcerned about a recession and remains focused on its 2% inflation benchmark. Its projections showed GDP rising 1.7% this year, lower than projections from December, before rising above 2% in the next two years. The labor market remains supportive: payroll and job gains averaged 200,000 per month over the last three months, and unemployment sits at 4.1%.
That gives you a balanced interview answer. Growth is slowing, inflation risk is sticky, but the labor market isn’t breaking. That’s why the Fed can wait.
Consumer data adds to that picture. Retail sales rose 0.2% in February, below expectations of 0.6%, but better than the prior month’s 1.2% downward revision. Core retail sales increased 1%, which feeds directly into GDP calculations. Online spending was the biggest contributor, with nonstore sales up 2.4%. Health and personal care rose 1.7%, and food and beverage sales increased 0.4%. Year over year, retail sales rose 3.1%, above the 2.8% inflation rate.
So yes, the consumer is pressured. But spending hasn’t collapsed.
Housing is sending mixed signals
Mortgage demand fell after a nine-week streak as rates moved higher and uncertainty weighed on buyers. Mortgage applications dropped 6.2% week over week. The average 30-year fixed contract rate increased from 6.67% to 6.72%, marking the first increase in nine weeks. Refinance applications fell 13% for the week.
At the same time, existing home sales moved in the other direction. February existing home sales rose 4.2% from the prior month to a seasonally adjusted annual rate of 4.26 million units, though that was still below 4.31 million units in February of the prior year. Inventory increased to 1.24 million units, up 5.1% from January and 17% from a year earlier. The median existing home price was $398,400, up 3.8% from a year ago.
This is a good reminder not to oversimplify housing. Higher rates can hurt mortgage demand, but more inventory can still bring buyers back. For real estate coverage, mortgage originators, homebuilders, building products, and consumer finance names won’t all react the same way.
Google’s $32 billion Wiz acquisition is a strategy and regulatory timing case
Google signed a definitive agreement to acquire Wiz, a New York-based cloud security startup, for $32 billion. It would be Google’s largest acquisition, with the deal expected to close in 2026. The strategic rationale is straightforward: strengthen Google’s security technology as artificial intelligence adoption and cybersecurity threats grow.
The deal is also a useful case study in timing. Google had tried to buy Wiz before in a $23 billion transaction, but that deal failed after Wiz chose to pursue an IPO. The IPO market still has not reopened significantly since deal activity slowed, and expected easing in regulatory conditions under the Trump administration helped make a renewed agreement more plausible.
Wiz was founded in 2020 and scaled quickly, reaching $100 million in annual recurring revenue within 18 months. Before renewed discussions with Google, it had targeted an IPO and $1 billion in annual recurring revenue. Even after joining Google Cloud, Wiz is expected to continue serving competitor platforms such as Amazon and Microsoft.
Alphabet shares fell 2% after the announcement and are down 15% this year. That market reaction is worth noting. Strategic fit does not automatically mean investors love the price, timing, or integration risk.
Interview angle for tech M&A
- Why buy instead of build? Wiz gives Google cloud security capabilities in a market where speed matters.
- Why now? The IPO market remains difficult, and regulatory expectations may be shifting.
- Why the premium? High-growth cloud security assets become more valuable as AI adoption raises security needs.
- What’s the risk? Paying $32 billion requires confidence in growth, retention, cross-selling, and integration.
BYD is turning charging speed into a competitive weapon
BYD shares hit a record high after the company unveiled fast-charging technology that can deliver 400 kilometers of range in five minutes. Hong Kong-listed shares rose as much as 6% to 408.80 Hong Kong dollars before finishing up 3.2%, while Shenzhen-listed shares rose 0.5%.
The technology will debut in BYD’s Han L sedan and Tang L SUV. This follows BYD’s expansion into autonomous driving through its “God’s Eye” driver-assistance system. The company remains China’s top EV seller, with February deliveries of 318,233 units. Tesla, by contrast, saw China sales drop 49% year over year in February to 30,688 units.
For students, the lesson is simple: EV competition is no longer just about unit growth. It’s about charging time, software, driver-assistance features, cost position, and local market dominance. If you’re discussing Tesla, BYD, or EV suppliers, talk about product differentiation and infrastructure friction, not just “EV demand.”
Forever 21 shows what happens when business model pressure becomes restructuring
Forever 21 filed for bankruptcy protection for the second time and is expected to wind down U.S. operations. The retailer has started liquidation sales across more than 350 locations. It had searched for a buyer and contacted more than 200 bidders, but no deal came together.
The company pointed to Shein and Temu as major contributors to its decline. A specific issue is the de minimis exemption, which allows goods under $800 to be shipped without tariffs. Forever 21’s parent company, Sparc Group, had tried to respond by entering a partnership with Shein in 2023, but that effort failed to materially change the outcome.
This is the restructuring version of a competitive strategy case. E-commerce pressure, tariff loopholes, and faster supply chains can destroy the economics of legacy retail. International stores and e-commerce will continue, but the U.S. store base is heading toward liquidation.
Germany’s slowdown is the bigger strategic question
Germany’s economy has become a useful macro case because it ties politics, exports, autos, China, tariffs, and fiscal policy together. Over the last five years, Germany’s real GDP has grown at only 0.1%, and GDP contracted 0.2% in 2024, marking a second consecutive year of negative growth.
The core issue is the country’s export-driven model. Germany’s auto industry has been central to that model for decades, but China is now producing stronger competitor products at lower prices while also limiting German vehicle imports. Add the threat of U.S. tariffs, and the model looks much more vulnerable.
The proposed path forward is not a full reinvention overnight. It’s more about loosening debt limits to support investment in AI, digitalization, modern infrastructure, and labor market strength. For an interview, this is a strong example of why industrial policy and fiscal flexibility matter. A highly educated workforce is valuable, but without investment, that advantage can fade.
What I’d actually bring into an interview
If you only remember a few points, make them practical. The EU defense fund is about who gets access to spending. Google-Wiz is about buying cloud security scale when IPO markets are still difficult. BYD is about product innovation changing the EV competitive set. The Fed is waiting because inflation risk is still present, but the labor market remains healthy.
That’s the difference between sounding like you read headlines and sounding like you can think like a banker. Always bring it back to revenue, margins, valuation, deal timing, and strategic positioning. That’s where the interview points are.