Market turmoil intensifies, tariff policies attract follow

1. Review of the Macro Situation This Week

1. Overall Market Performance

This week, the risk asset market continued to fluctuate. Apart from gold maintaining an upward trend, the U.S. stock market, cryptocurrency, and commodities markets generally performed weakly. Especially after the attitude towards automobile tariff policies became more stringent, the market clearly weakened in the latter half of the week.

The cryptocurrency market is generally calm but lacks momentum. Despite the United States introducing new stablecoin regulatory legislation, the market is still waiting for clearer directional guidance against the backdrop of overall liquidity shortages and macro uncertainties.

2. Economic Data Analysis

The GDPNow model predicts a GDP of -1.8% for the first quarter, unchanged from last week. After adjustments to the model, the forecast for actual domestic private investment growth rate has decreased from 9.1% to 8.8%.

The labor market remains weak. Although the number of initial claims for unemployment benefits was slightly below expectations at the beginning of the week, the long-term trend shows an increase in the unemployment rate across 290 metropolitan areas and a rise in the number of continued claims for unemployment benefits, indicating increasing pressure on the job market.

The February PCE data exceeded expectations, while personal spending declined, reflecting a situation of weak economic growth amid high inflation. Service costs are the main factor driving the increase in PCE.

3. Liquidity and interest rate conditions

The Federal Reserve's broad liquidity has slightly improved but remains at around 6 trillion.

The yield curve of government bonds shows a "bear steep" shape, with the long end rising more than the short end. The market still has concerns about inflation, and the expectation for a rate cut in June has decreased.

The credit spread on high-yield bonds continues to widen, reflecting investors' concerns about the increasing pressure on the corporate operating environment, which may further exacerbate the risk of economic recession.

2. Future Market Outlook

1. Key Variables

The equal tariff policy to be announced on April 2 is the biggest variable in the market recently. Tariffs exceeding expectations or retaliatory measures may impact the fragile market.

2. Focus on data

Next week, it is important to follow the U.S. March unemployment rate and non-farm payroll data to further assess the risk of economic recession.

3. Investment Strategy Suggestions

• Focus on defense, avoid aggressive operations
• Can appropriately allocate to arbitrage-type quantitative funds, gold, US Treasury bonds, and other safe-haven assets.
• Overvalued tech stocks and crypto assets are facing dual pressures; it is recommended to reduce positions or take profits in a timely manner.
• If the impact of tariffs is less than expected, market sentiment may improve, but this does not mean a trend reversal.
• Be patient and wait for clearer macro signals.

The market is currently still in a complex situation of "economic weakness, high inflation, and unclear policies." Risk assets are facing downward pressure, and a cautious attitude is still needed in the short term. The future direction of the market will depend on the implementation of tariff policies and the performance of employment data.