SignalPlus Macro Analysis (20240313): CPI data exceeds expectations, risk assets rebound again

In February, the overall CPI and core CPI in the United States both rose by 0.4% month-on-month, with most components showing growth: energy rebounded by +2.3%, gasoline by +3.8%, services by +0.5%, and housing by +0.4%. Super core inflation remains high at 0.47%, far exceeding the Federal Reserve's target, but it is difficult to reach the hawkish threshold. Risk assets still rebounded strongly after the data was confirmed.

After the data was released, the SPX index immediately rose by 1% and successfully held onto the gains after morning fluctuations. Tech stocks led the rally again, with Nvidia rising about 9%, while Oracle surged 12% due to soaring cloud revenues, with backlogged orders reaching $80 billion, exceeding the expected $59 billion, and total revenue growth of 25% this quarter.

Although investors are now accustomed to the daily rise in risk (short sellers have become an endangered species), the rebound in the stock market amid strong inflation data is still rare in modern history, or at least since the beginning of the rate hike cycle. This may indicate that investors are more focused on the micro profit "fundamentals" rather than macro factors. However, despite the high CPI, the bond market remains confident in the Federal Reserve starting to cut rates in June (63%), with expectations of 3.4 rate cuts by the end of the year. As always, the Fed's next steps will be quite limited.

In the credit market, with 2.5 weeks left until the end of March, high investment-grade bond issuance has already broken quarterly records, and with no negative sentiment across all asset classes, CDS spreads are at their narrowest level in over two years. Could this year's black swan risk be that there has been no significant pullback across all asset classes? Just thinking about it is frightening.

As expected, the cryptocurrency market continues to maintain its upward trend. With VanEck announcing the waiver of fees for the next 12 months, the daily trading volume of spot ETFs has once again reached $8.5 billion. Net inflows into ETFs, excluding GBTC, increased by $1 billion yesterday, more than double the $500 million outflow from GBTC, and the total assets under management of ETFs are just a step away from $60 billion, even though this quarter hasn't ended yet.

For those who are still not satisfied, the trading volume of the famous 2x leveraged ETFs has also surged, with buying occurring every time BTC dips, and there are no signs of a slowdown in trading volume increase. With institutional investors joining the fray, open interest in CME Bitcoin futures has also reached new highs. In the current situation, the distinction between leveraged tech/AI stocks and cryptocurrencies is not obvious, as both seem to move in sync during U.S. trading hours. But as long as everything is rising, no one will care; just a reminder to pay attention to risks!