Macroeconomic Weekly Report: Market Under Pressure, Follow the Implementation of Reciprocal Tariff Policies

1. Macroeconomic Review of This Week

1. Market Overview

This week, risk assets continued to show volatility as the market awaits the implementation of reciprocal tariff policies. Apart from gold maintaining its upward trend, the overall performance of the US stock market, cryptocurrency, and commodity markets has been weak. Particularly after the announcement of a tough stance on auto tariffs, the market weakened significantly in the latter half of the week.

The cryptocurrency market is generally calm but with weak momentum. Despite the United States introducing a new stablecoin bill aimed at regulating payment-type stablecoins and establishing a new compliance mechanism, the ongoing loose policy direction has not immediately reversed the market's sluggish state. In the context of poor overall liquidity and ongoing macro uncertainty, the market still needs to wait for new directions after the implementation of reciprocal tariffs.

2. Economic Data Analysis

This week's economic data focuses on the U.S. labor market and PCE data, while also conducting a forward-looking analysis of the credit market.

The latest GDPNow forecast for the first quarter is -1.8%, unchanged from last week. The model has been adjusted to include gold imports and exports. The predicted growth rate of real domestic private investment for the first quarter has been revised down from 9.1% to 8.8%.

The trend of economic weakening in the United States is evident, but there is currently no hard data providing a clear signal of recession. However, based on multiple data validations from the labor market and credit market, the risk of recession has indeed increased.

In the labor market, the unemployment rate has risen in 290 out of 387 metropolitan areas. The number of ongoing unemployment benefit claims in Washington, D.C. is at its highest level since 2021, but initial claims data has not changed much.

The February PCE data showed that both the annual and monthly rates exceeded expectations, primarily driven by rising service costs. At the same time, the monthly rate of personal spending in February fell short of expectations, reflecting a situation where economic weakness coexists with high inflation.

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 higher than the short end. The market still has concerns about inflation, with the probability of a rate cut in June decreasing compared to last week.

The pressure in the credit market is increasing, and the credit spread of high-yield bonds continues to widen, indicating that investors are facing increasing pressure from the microeconomic environment of companies. This may further squeeze the refinancing costs and profits of companies, which is an unfavorable forward-looking signal, suggesting that the risk of an economic recession in the United States may be increasing.

2. Macroeconomic Outlook for Next Week

The market focus remains on the announced reciprocal tariff policy on April 2, which will be the biggest variable for the risk market in the near term. If tariffs exceed expectations or retaliatory measures are encountered, it could have a significant impact on the fragile market. Additionally, attention should be paid to next week's US unemployment rate and non-farm payroll data to further assess recession risks.

Overall opinion:

1. Defense first. The current macro environment presents a "weak economy + high inflation + policy swings" combination, with risk assets facing dual pressure from interest rate stress and recession expectations. It is recommended to consider adjusting positions proactively by building up or taking profits.

2. In terms of configuration, you can moderately allocate safe-haven assets such as gold and US Treasuries.

3. If the reciprocal tariff policy is below expectations or the intensity of retaliation is low, market risk appetite may reverse somewhat, but it will not be enough to directly create upward momentum. Greater macroeconomic incentives are still needed.

4. Market vulnerability is high, it is recommended to avoid chasing highs and selling lows, and to strictly adhere to discipline.