SignalPlus Macro Analysis Special Edition: Slow Grind
The macro market has entered a low-volatility consolidation phase, with market sentiment returning to the familiar "Goldilocks" mode, as the stock and bond markets gradually rise under mild economic data and declining volatility.
The Trump administration has once again released new developments regarding tariffs, but the market's reaction has been relatively muted, indicating that it is becoming increasingly immune to such news. The latest reciprocal tariff policy has been postponed until April 1 and will be reviewed for major trading partners such as Canada, Mexico, India, and China.
Overall, despite the market's various imaginations regarding Trump's second term policies, the performance of Trump-related trades has not been good this year, significantly lagging behind the major indices, with the dollar and oil prices experiencing substantial declines, while emerging market stocks and currencies have performed relatively strongly.
Notably, the Chinese stock market has performed exceptionally well, initially driven by the DeepSeek AI craze, and recently due to the warming relationship between the government and domestic tech companies. The Hang Seng Index (HSI) seems poised to break through a years-long downtrend, while major companies like Alibaba are beginning to attract the attention of U.S. fund managers and institutional investors.
U.S. economic data has been mediocre, with last week's CPI data exceeding expectations, while last Friday's retail sales data was weak, leading market expectations for a rate cut in June to rise to around 60%. Chairman Powell has made every effort to downplay market concerns about inflation during the recent Congressional Financial Services Committee hearing:
"The CPI data is above almost all predictions, but I want to remind everyone of two points. First, we will not be overly optimistic because of one or two good data points, nor overly pessimistic because of one or two bad data points. Second, our inflation target focuses on the Personal Consumption Expenditures (PCE) price index because we believe it better reflects the inflation situation." - Powell, February 13, 2024
However, in this seemingly stable market environment, the EPS forecast for S&P 500 companies in 2025 has been significantly revised downwards. Additionally, Warren Buffet has been gradually reducing his equity exposure, completely selling off his SPX ETF holdings in the fourth quarter of last year, including a significant reduction in bank stocks.
Although the stock market has not seen significant gains year-to-date, the demand for physical gold delivery at major exchanges has surged, causing gold prices to soar. According to Bloomberg, the amount of gold transferred to U.S. COMEX-approved warehouses by financial institutions has increased by over 70% compared to usual, with approximately 300 to 400 tons of gold shipped from London to New York over the past eight months.
The market is concerned that Trump's tariff policy will drive up import prices, prompting traders to start hoarding gold, while the Federal Reserve's indifference to inflation has further fueled demand for gold.
In the cryptocurrency market, unlike gold's stable performance, ETH has been struggling in distress, with its price dropping 20% this year and an actual volatility of about 60-70%, making it the worst-performing asset among all major cryptocurrencies and major stock indices.
The only redeeming factor is that market sentiment towards ETH has become extremely pessimistic, while Trump's World Liberty Financial has continued to buy ETH during this downturn. Is ETH about to experience a dead cat bounce?
On the other hand, while BTC prices continue to fluctuate around $100,000, the cumulative inflow of funds into BTC ETFs remains stable. Tudor Investment's 13F filing shows that as of the end of 2024, the IBIT ETF is the largest single stock holding of the fund (with assets under management of $12 billion).
Finally, FTX will finally begin repayments this week (starting with small accounts), and whether this capital will flow back into the cryptocurrency market is worth our attention.
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