If you pay any attention to sports (and even if you don’t), it would have been almost impossible to miss “THE” trade. But, if you happened to miss it, here is the gist. The NBA trade deadline was fast approaching, and there was no expectation of anything significant happening.
Then, completely out of the blue, the Dallas Mavericks agreed to trade their superstar guard, Luka Doncic (25), to the Los Angeles Lakers for Anthony Davis (31) and some other role players. Without getting into the weeds on the basketball side of things, let’s just say the trade was so surprising that people thought the social media account of the reporter who broke the news was hacked.
And while the on-court implications are thrilling, the financial consequences of this blockbuster move are even more fascinating—if not downright shocking. With that in mind, let’s look at the wide-ranging financial impact of the trade.
First, let me preemptively state that the numbers I’m about to discuss are mind-boggling. Sports contracts, particularly in the NBA, have become absolutely enormous. Let’s start with Luka’s current contract, a five-year $215 million contract he signed in 2022 that pays an average annual salary of $43 million. Not too shabby, right? But what is even less shabby, how about the five-year $345 million “supermax” contract he was likely to sign had he stayed with the Mavericks?
Yes, had he stayed with the Mavs, he would have been eligible for the “supermax” deal, which would have allowed him to be paid a greater percentage of the total salary cap. However, it is only available for players with less than 10 years of NBA service if they are still with their original team. But since he was traded (even though he had no desire to leave), he no longer qualifies for it. So what does this mean? Over the next three years, he stands to lose almost $18 million in salary.
But if that sounds bad, it’s only part of the story. While the Mavericks played in Texas—a state with zero income tax on earnings during home games—California isn’t as forgiving. In L.A., Doncic will face a 13.3% state income tax on earnings during 41 home games. Over three seasons, this burden could be close to $18 million in taxes, compared to just $3 million if he had stayed in Dallas. That’s another $15 million.
When you combine the lower salary with the higher tax bill, Doncic is looking at an overall loss of approximately $33 million in potential earnings. And while I’m not going to lose any sleep over the amount of money Luka stands to lose from this trade (he’ll be just fine), it is without question a significant amount of money, even for him, and it’s gone through none of his own doing.
In this trade, the ripple effects extend well beyond the court. It’s a stark reminder that in the world of professional sports, the dollars are massive, every move carries both athletic and financial weight, and the players, for the most part, have very little control.
Markets / Economy
- Equity markets were volatile again this week, which seems like a 2025 theme. The S&P was up 1.5%, the Nasdaq was up 2.6%, and the small-cap Russell 2000 was flat.
- U.S. CPI rose 0.5% MoM in January, up from 0.4% in December and surpassing market expectations of 0.3%. It was the highest monthly inflation rate since August 2023.
- Core CPI rose by 0.4% MoM in January, up from the 0.2% increase in the previous month and above market expectations of slower growth of 0.3%.
- U.S. Producer prices rose 0.4% MoM in January, below an upwardly revised 0.5% in December but above forecasts of 0.3%, led by food and energy prices.
Stocks
- U.S. equities were in positive territory. Technology and Communication Services were the top performers, while Healthcare and Financials lagged. Value stocks led growth stocks, and large caps beat small caps.
- International equities closed higher for the week. Emerging markets fared better than developed markets.
Bonds
- The 10-year Treasury bond yield decreased one basis point to 4.47% during the week.
- U.S. bond markets were in positive territory this week, while International bond markets were negative.
- High-yield bonds led for the week, followed by corporate bonds and government bonds.
