SignalPlus Macro Analysis Special Edition: Slow Grind

The macro market has entered a period of low Fluctuation consolidation, with market sentiment returning to the familiar 'Goldilocks' mode, as stocks and bonds edge up under mild economic data and declining Volatility. The Trump administration has once again released new developments on tariffs, but the market response is relatively muted, indicating that the market is gradually becoming immune to such news. The latest reciprocal tariffs policy has been postponed until April 1st and will be reviewed for major trading partners such as Canada, Mexico, India, and China.

Overall, despite the market's many speculations about Trump's second term policies, the performance of Trump-related trades this year has not been good, significantly lagging behind the major market indices. The US dollar and crude oil prices have fallen sharply, while emerging market stocks and currencies have shown relative strength.

Of particular note, the Chinese stock market has performed exceptionally well, initially driven by the DeepSeek AI craze, and more recently due to the warming relations between the government and domestic technology companies. The Hang Seng Index (HSI) appears to be preparing to break out of its years-long downtrend, while key companies such as Alibaba are also attracting the attention of U.S. fund managers and institutional investors.

The U.S. economic data performed flat, with last week's CPI data higher than expected, and last Friday's retail sales data weak, causing market expectations for a rate cut in June to rebound to around 60%. Chairman Powell recently made every effort to downplay market concerns about inflation at the latest congressional Financial Services Committee hearing: "CPI data is almost higher than all the forecast values, but I would like to remind everyone of two points. First, we will not be overly optimistic because of one or two good data points, nor will we be overly pessimistic because of one or two bad data points. Second, our inflation target focuses on the Personal Consumption Expenditures (PCE) price index, as we believe it can better reflect 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 downward. In addition, Warren Buffet is also gradually reducing his stock exposure, completely selling off the holdings of SPX ETF in the fourth quarter of last year, including significantly reducing bank stocks.

Although the stock market has not seen much fluctuation since the beginning of the year, the demand for physical gold delivery on major exchanges has been strong, causing the price of gold to soar. According to Bloomberg, the amount of gold transferred from financial institutions to the US COMEX approved vaults has increased by 70% +, with approximately 300-400 tons of gold transported from London to New York in the past 8 months. Market concerns about Trump's tariff policy pushing up import prices have led traders to hoard gold on a large scale, while the Fed's indifference to inflation further fuels demand for gold in the market.

In the cryptocurrency market, unlike the stable performance of gold, ETH has been struggling in adversity, with a 20% decline in price so far this year, and a Volatility rate of about 60-70%, making it the worst-performing asset among all major cryptocurrencies and major stock indices. The only positive aspect is that the market sentiment towards ETH is extremely pessimistic, while Trump's World Liberty Financial continues to buy ETH during this downturn. Will ETH soon see a dead cat bounce?

On the other hand, although the BTC price is still fluctuating around $100,000, the cumulative fund inflow of BTC ETF remains stable. Tudor Investment's 13F filing shows that as of the end of 2024, IBIT ETF is the fund's largest single stock holding (with assets under management of $12 billion).

Finally, FTX will start repaying (starting from small accounts) this week. It is worth our attention whether the funds will flow back into the cryptocurrency market.