4 Alpha Core Views:

I. Macroeconomic Review of the Week

1. Market Overview

• U.S. Stocks: Slightly up, but overall still in a downward trend, with low trading activity; the Put/Call Ratio has decreased, indicating some funds are starting to bottom-fish.
• Commodity Market: Gold continues to rise after breaking $3000/oz, copper prices increased by 0.8%, with a cumulative rise of over 11% in the past three months; crude oil prices stabilized around $68/barrel, while natural gas prices fell.
• Cryptocurrency Market: Overall trading remains sluggish, with BTC fluctuating around $84,000, lacking upward momentum, and altcoins following BTC's movements.

2. FOMC Meeting Analysis

• Strategic Level: The Federal Reserve adheres to a "data-dependent" principle, avoiding commitments to specific rate cut timelines, maintaining policy flexibility to address uncertainties.
• Tactical Adjustments (Three Key Measures):

(1) Adjusting Inflation Expectation Management: Emphasizing the New York Fed's 5-year inflation expectation data, downplaying the University of Michigan Consumer Sentiment Index to reduce market noise.

(2) Re-emphasizing "Transitory Inflation": Downplaying the long-term impact of tariffs on inflation to provide policy space for rate cuts and prevent the market from falling into stagflation panic.

(3) Adjusting the pace of Quantitative Tightening (QT): While liquidity is sufficient, the Fed is slowing QT to hedge against liquidity shocks that may arise from the debt ceiling issue.

3. Changes in Liquidity and Interest Rate Markets

• Liquidity Recovery: Broad liquidity reached $6.1 trillion this week, with outflows from the TGA account driving liquidity improvement; the usage of the Fed's discount window has decreased, indicating alleviated market funding pressure.
• Interest Rate Market: Rate cut expectations remain stable, with a 67% probability of a rate cut in June and an expected three cuts throughout the year.
• Bond Market: Short-term rates are declining faster than long-term rates, steepening the yield curve, reflecting increased certainty about rate cuts, but lingering concerns about inflation rebound.
• Credit Market: Investment-grade credit spreads have widened, with a slight increase in credit risk; market risk appetite has decreased, but no systemic risk signals have emerged yet.

II. Macroeconomic Outlook for Next Week

1. Reciprocal Tariffs (Effective April 2) are the Market Focus

• Tariff Strength: The level and scope of tariffs will affect commodity prices, subsequently impacting inflation and corporate profits. If tariffs exceed expectations, it may raise import costs, pressuring corporate profits and impacting both stock and bond markets.
• Global Trade Friction: If retaliatory measures from other countries arise, it will exacerbate supply chain tensions, increase inflation, threaten global economic growth, and potentially trigger panic selling in the market, reinforcing the "stagflation trade" logic.

2. The Market Remains Cautious, with Strong Hedging Demand for Tail Risks

• VIX has retreated, but credit market risk signals have intensified; the market has not fully escaped panic mode, with investors inclined to reduce risk exposure and increase holdings in safe-haven assets (gold, government bonds, etc.).
• Federal Reserve Policy Direction: If tariffs push inflation higher, the Fed may tighten policy earlier, leading to tighter market liquidity and increased volatility; if inflation remains controllable, the Fed may continue a dovish stance, providing market cushioning.

3. Strategy Recommendations

The market is still in an uncertain phase of policy and risk pricing. Short-term strategies should focus on "defensive + flexible offense," capturing phase-specific opportunities while avoiding tail risks.

【Macroeconomic Weekly Report┃4 Alpha】 After the FOMC Meeting, Before the Implementation of Reciprocal Tariffs

I. Macroeconomic Review of the Week

1. Market Overview

As we pointed out in last week's report, market sentiment remains cautious, but there are opportunities for a phase-specific rebound. Following the dovish signals from last week's FOMC meeting, various risk assets performed slightly differently this week.

U.S. Stocks: Slightly up this week, with the Dow Jones showing better gains

• Dow Jones Industrial Average (+1.2%)

• Nasdaq Index (+0.2%)

• S&P 500 Index (+0.6%)

• Russell 2000 (+0.7%)

Despite the slight increase in U.S. stocks this week, the overall trend remains downward, with low trading activity. From the options perspective, the Put/Call ratio is at 0.86, down from last week's high, reflecting that some funds have begun bottom-fishing.

Commodity Market: Gold and Copper Prices Continue to Rise

This week, gold continued to rise above $3000/oz, with some pullback following the Fed's meeting. Copper spot prices increased by 0.8%, having risen over 11% in the past three months. The energy market showed mixed performance: crude oil prices stabilized around $68/barrel, while natural gas prices continued to decline.

Cryptocurrency Market: Overall trading remains sluggish

The market lacks new catalysts, with Bitcoin continuing to fluctuate around $84,000, showing no significant upward momentum. Altcoins are also following BTC's movements.

2. FOMC Meeting Analysis

Last week's major macro event focused on the Fed's meeting and Powell's statements. The specific analysis is as follows:

In the current complex macro environment, the Fed faces multiple dilemmas. Risks of stagflation, political uncertainties, and liquidity tightening in financial institutions create hidden crises, making policy decisions more nuanced. Additionally, due to data lags, the impacts of tariff shocks and supply chain changes will not manifest in real-time, and internal policy disagreements within the FOMC are intensifying. Therefore, Powell has made a series of adjustments at both the strategic and tactical levels in recent statements to balance market expectations and economic fundamentals.

Chart 1: Changes in FOMC Dot Plot      Source: Federal Reserve

3. Changes in Liquidity and Interest Rate Markets

The Fed's balance sheet currently stands at $6.7 trillion, with tightening further slowing; from a broad liquidity perspective, liquidity continues to recover, reaching $6.1 trillion this week, still due to outflows from the U.S. Treasury's TGA account; the usage of the Fed's discount window continued to decline this week, indicating an overall improvement in current macro liquidity.

Chart 2: Changes in U.S. Dollar Base Liquidity          Source: Gurufocus

From the interest rate market perspective, following the Fed's meeting, the pricing for rate cut expectations indicates a 67% probability of the first cut in June, with about three cuts expected throughout the year.

Chart 3: Interest Rate Market Pricing for Rate Cuts in 2025          Source: CME

From the bond market perspective, short-term rates are declining at a noticeably faster rate than long-term yields, steepening the Treasury yield curve, reflecting that while market certainty about the rate cut path has increased, there are still significant concerns about inflation rebound and even stagflation narratives.

Chart 4: US Treasuries Yield Curve          Source: U.S. Treasury

This week, we continue to monitor forward-looking signals in the credit market. From the perspective of the default swap index, the U.S. investment-grade credit default swap index (CDX IG) continues to rise, with credit spreads widening, indicating a slight increase in credit risk pricing for investment-grade corporate debt, and a decrease in market risk appetite. However, combined with liquidity indicators, despite the accumulation of risks, there have not yet been any signs of severe warning.

II. Macroeconomic Outlook for Next Week

Under the influence of last week's dovish signals from the Fed, the narrative of "transitory inflation" is being used to hedge against the expected risks brought by tariffs, but market concerns have not dissipated, and as we approached the end of last week, the market began to correct.

The current focus is on the "reciprocal tariffs" starting on April 2, with two main areas of concern:

• Tariff Strength: The level and scope of tariffs will directly affect the prices of imported and exported goods, subsequently impacting inflation and corporate profits. If tariffs exceed expectations, import prices may rise significantly, increasing corporate costs, pressuring profit margins, and negatively affecting both stock and bond markets.
• Retaliatory Measures from Other Countries: If tariffs provoke retaliation from other countries, it will exacerbate global trade tensions, further disrupt supply chains, increase inflationary pressures, and threaten global economic growth. If retaliatory measures escalate, it may trigger panic selling in the market, putting significant downward pressure on risk assets and reinforcing the "stagflation trade" logic.

Over the past week, although the VIX has retreated, risk signals in the credit market have intensified, indicating that the market has not fully escaped panic mode, and there remains strong demand for hedging against tail risks.

Before the tariff policy becomes clear, the market may continue to adopt a wait-and-see attitude. Investors may take defensive strategies: reducing risk exposure and lowering allocations to high-risk assets like stocks; increasing demand for safe-haven assets, such as gold and government bonds, to hedge against uncertainty.

Additionally, the impact of reciprocal tariffs on the Fed's stance is also crucial. If tariffs lead to sustained inflationary pressures, the Fed may be forced to tighten monetary policy earlier, tightening market liquidity and increasing volatility. Conversely, if inflationary pressures remain controllable, the Fed may maintain a dovish stance, providing market cushioning.

In summary, the market remains in an uncertain phase of policy and risk pricing, and short-term strategies should focus on "defensive + flexible offense," capturing phase-specific opportunities while avoiding tail risks.

Key Macroeconomic Data for Next Week

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