Market Trading Logic Analysis: Economic Slowdown Expectations Dominate, Stagflation Risks Emerge

1. Current Market Trading Situation

Market signals for interest rates show that the 2-year U.S. Treasury yield is rapidly declining, widening the gap with short-term financing rates. The 10-year yield has fallen below short-term rates, reflecting that the market is preparing for an economic slowdown and the possibility that the Federal Reserve may be forced to cut interest rates. At the same time, the inversion of long-term rates intensifies recession warnings.

There is a contradictory phenomenon in liquidity. Although the consumption of government accounts has driven a marginal improvement in dollar liquidity, market risk aversion has led to a withdrawal of funds from risk assets and a surge into the treasury market, creating a paradox of "liquidity easing but risk appetite shrinking."

2. Deep Reasons for the Turbulence of Risk Assets

Weak economic data and policy uncertainty are the main reasons for the volatility of risk assets:

1. Economic cracks are showing: the consumer confidence index has significantly declined, the job market is cooling, and with tariff threats, market concerns about a "hard landing" for the economy have intensified.

2. The narrative of artificial intelligence is shaken: After the financial reports of chip giants triggered technological controversies, coupled with the technological iterations of AI companies, the market has raised doubts about the commercialization prospects of AI, leading to a sell-off in technology stocks, especially in sectors related to computing power.

3. Chain Reaction in the Cryptocurrency Market: Changes in the price structure of the futures market weaken the attractiveness of arbitrage, combined with ETF capital outflows, leading to a synchronized decline of Bitcoin and the stock market, and an increase in market panic.

3. Future Key Battlegrounds: Employment Data Will Set the Tone for the Intensity of "Recession Trades"

In the coming week, employment data will become the focus of the market:

• If the February non-farm employment continues to exceed expectations, or if the manufacturing PMI declines further, it will strengthen recession expectations, pushing U.S. Treasury yields down further, putting pressure on risk assets.
• Conversely, data exceeding expectations may temporarily repair the market's expectations for a "soft landing."

At the same time, it is necessary to be vigilant about policy risks, including details of tariff policies and statements from Federal Reserve officials regarding the path of interest rate cuts, as these factors could trigger significant market fluctuations.

Investment Strategy Recommendations

In the current environment of high uncertainty, it is advisable to focus on defense and wait for an opportunity to counterattack. Although the cryptocurrency industry faces selling pressure in the short term, improvements in the regulatory environment and technological innovation still support its long-term growth potential. Investors should closely monitor economic data, interest rate trends, liquidity changes, and policy directions, and adjust their expectations and strategies in a timely manner.