Macro Weekly Report: Market Under Pressure, Awaiting Clarity on Tariff Policies

1. Macroeconomic Review of This Week

1. Market Overview

This week, risk assets showed significant volatility, with the market still waiting for the announcement of new tariff policies. Aside from gold continuing to rise, the overall performance of the US stock market, cryptocurrencies, and the commodity market has been weak. After a certain country's leader took a strong stance on auto tariffs, market conditions noticeably deteriorated in the latter half of the week.

The cryptocurrency market has been generally calm this week, but the momentum is weak. Despite the US introducing a new stablecoin regulatory bill, the ongoing accommodative policy direction has not immediately reversed the market's sluggishness. In the context of overall poor liquidity and persistent macro uncertainty, the market still needs to wait for the new tariff policies to be implemented to provide a new direction.

2. Economic Data Analysis

GDPNow's latest forecast for the first quarter GDP is -1.8%, unchanged from last week. The model has recently been adjusted to take gold imports and exports into account. According to the latest data, the forecast for the first quarter's actual domestic private investment growth rate has decreased from 9.1% to 8.8%.

The trend of economic weakening in the United States is evident, but there are no clear signals of a recession yet. However, multiple data points from the labor market, credit market, and others confirm that the risk of recession has indeed increased.

In terms of the labor market, although the number of initial jobless claims was slightly lower than expected at the beginning of the week, the labor market shows clear signs of fatigue in the long term. Data shows that in the 387 metropolitan areas in the United States, the unemployment rate has risen in 290 of them. The number of people continuously applying for unemployment benefits from a certain government department is at a near two-year high, which may be related to difficulties in implementing layoff plans.

February PCE data exceeded expectations, with both the annual and monthly rates higher than anticipated. The data shows a coexistence of weak economic performance and high inflation, as consumer spending declines but inflation remains difficult to curb.

3. Liquidity and Interest Rates

The Federal Reserve's broad liquidity margin continues to improve, remaining around 6 trillion. The yield curve for government bonds shows a pronounced bear steepening, with the slope of long-term bonds rising more than that of the short end. In terms of interest rate expectations, the probability of a rate cut in June has decreased compared to last week, and the spread of 10-year Treasury Inflation-Protected Securities (TIPS) has slightly increased, indicating that the market still has concerns about inflation.

The credit spreads of high-yield bonds continue to widen, reflecting investors' growing concerns about the pressures in the microenvironment of enterprises. If the credit spreads widen further, it may squeeze the refinancing costs and profits of companies, which is an unfavorable forward-looking signal, indicating that the risk of a recession in the U.S. economy may be increasing.

2. Macroeconomic Outlook for Next Week

The market focus remains on the upcoming announcement of new tariff policies, which will be the biggest variable in the risk market in the near term. If tariffs exceed expectations or face retaliation, it could have a significant impact on the fragile market. Additionally, attention should be paid to the US unemployment rate and non-farm payroll data to further assess recession risks.

Overall view:

1. Defense first. The current macro environment presents a combination of "weak economy + sticky inflation + policy swings," putting dual pressure on risk assets. It is recommended to reduce positions or take profits.

2. In terms of configuration, a moderate allocation to safe-haven assets such as gold and U.S. Treasury bonds can be considered.

3. If the new tariff policy is below expectations or the retaliation intensity is mild, market risk appetite may reverse, but greater macroeconomic stimulus is still needed.

4. The market is highly vulnerable, avoid chasing highs and selling lows, and strictly adhere to discipline.