4 Alpha Core Views: 1. Macro review this week

1. Market summary

Influenced by Trump's tough attitude towards automobile tariffs, market sentiment has weak turnover in the second half.

The crypto market is weak, liquidity and macro uncertainty are still there, and the market is waiting and watching the implementation of reciprocal tariffs.

Gold continued its upward trend, with U.S. stocks, cryptocurrencies and commodity markets performing weakly.

2. Economic data analysis

GDPNow predicts that Q1 GDP is -1.8%, indicating a weak trend.

The labor market is showing signs of weakness, with the unemployment rate in 290 metropolitan areas rising, and the number of people who continue to apply for unemployment benefits increased.

The PCE in February exceeded expectations, while consumer spending declined, and the economy showed a combination of "weak growth + high inflation".

3. Liquidity and interest rates

The Fed's broad liquidity improved slightly, and remained at the 6 trillion level.

The US Treasury yield curve is "steep", long-term bond yields are rising faster than the short-term, and the market is still concerned about inflation.

The credit market pressure has increased, the credit spread of high-yield bonds has widened, the corporate financing environment has deteriorated, and the risk of recession has increased.

2. Macro outlook next week

1. The biggest market variable: Trump's reciprocal tariffs were implemented on April 2. If the tariffs exceed expectations or are retaliated, it will impact market sentiment.

2. Pay attention to the U.S. March unemployment rate and non-farm employment data to verify the risk of recession.

3. Investment advice: Defence is preferred, and avoid chasing rises and selling falls

Adjust allocation of arbitrage quantitative funds, gold, and US bonds as safe-haven assets.

High-valuation technology stocks and crypto assets are still suppressed by interest rates and recession. It is recommended to lower positions or take profits downward.

If the tariff impact is lower than expected, the market risk preference may rebound, but it does not mean a trend reversal, and further macro favorable support is still needed.

The market is still in a "weak economy + high inflation + swing" pattern, and risky assets are facing downward pressure. The future market direction depends on the impact of the implementation of peer tariffs and whether the US employment data confirms the risk of recession. In the short term, defense is still necessary and wait for a clearer signal.

The market pressure increases, waiting for the implementation of peer tariffs? 1. Macro review of this week 1. Market review of this week

In addition to gold continuing its rise, the overall trend of US stocks, cryptocurrencies and commodity markets is quite weak. After Trump announced his tough attitude towards automobile tariffs, the market situation in the second half of the week has significantly worsened.

Check 1:4h level, BTC is still below EMA200 Source: Tradingview

Left;">From the perspective of the cryptocurrency market, the market was generally calm this week, but the momentum was weak. The U.S. House of Representatives launched the "Stablecoin Transparency and Accountability Promotion Ledger Economy Act", which aims to regulate payment stablecoins, establish a new compliance mechanism, expand regulatory power, and clarify key definitions about the issuance and use of digital assets supported by the US dollar. The continued easing of direction did not immediately reverse the market downturn. In the context of poor overall liquidity and macro uncertainty still exist, consistent with our previous predictions, the market still needs to give new directions after the implementation of peer tariffs.

2. Economic data analysis

This week's data focuses on the US labor market and PCE data, and at the same time, further analysis is given to give forward signals on the credit market.

GDPNow's latest quarterly GDP forecast is -1.8%, the same as last week. It is worth mentioning that the model has made an official adjustment, which takes gold imports and exports into consideration. According to recent data released by the U.S. Census Bureau and the National Association of Real Estate Brokers, the forecast for real total private investment growth rate in the first quarter fell from 9.1% to 8.8%, and the adjusted model forecast was 0.2%.

Chapter 2: GDP latest forecast Source: Atlanta Fed

From the data, the U.S. economic weakness trend is very obvious, but there is currently no hard data to give a clear signal of recession. However, judging from the verification of multiple data in the labor market and credit market, the risk of recession has indeed increased.

From the labor market, although the weekly initial request data released this week is slightly lower than expected and is also lower than the previous value, if we look further, the fatigue in the labor market is very obvious.

Chapter 3: U.S. Unemployment Week Initial Data Source: Zerohedge

Follow the data provided by the states, the unemployment rate in 290 of the 387 metropolitan areas in the United States is rising.

Chapter 4: Unemployment rate data in some states of the United States (after seasonal adjustment) Source: U.S. Bureau of Labor Statistics, MishTalk

In particular, it is noted that the number of people who continue to apply for unemployment benefits in Washington, DC is currently at the highest level since 2021, but the initial application data still has not changed significantly, which shows that the layoff and expenditure reduction plan of the DOGE department led by Musk has not been very smooth, which may be due to the large number of lawsuits.

The PCE data was released on Friday night, which is the inflation data that the Federal Reserve is most concerned about. Both the annual and monthly PCE rates in February exceeded expectations. After the data was released, risky assets turned from rising to falling.

In addition, there is no tariff-driven impact in the PCE data, and the main factor in this rebound is service costs. In addition, the monthly rate of personal spending in the United States in February was 0.4%, lower than expected. The two data reflect that on the one hand, the economy is weak, consumption expenditure is declining, and on the other hand, inflation is still high, and it is difficult to fall in the last kilometer.

Chart 5: US February PCE data Source: US Department of Commerce

3. Liquidity and interest rates

The Fed's broad liquidity margin continued to improve this week, and as of March 19, it was still around 6 trillion.

From the interest rate market perspective, the yield curve of treasury bonds is significantly steep, and the upward slope of long-term bonds is significantly higher than that of short-term bonds. From the perspective of interest rate expectations, based on the latest interest rate derivatives trading results, the probability of interest rate cuts in June is lower than last week, while the spread of 10-year inflation-protected bonds has risen slightly, indicating that the market is still concerned about inflation.

From the entire curve pattern, the curve slope in the middle is more obvious, which may indicate that the market believes that the Fed will still rely on data. Faced with high inflation and tariffs, the Fed cannot prevent interest rate cuts.

Chapter 6: Changes in the U.S. Treasury yield curve Source: US Treasury Department

In addition, in the weekly reports of the previous two weeks, we reminded of the pressure on the credit market. Follow-up data this week showed that the credit spreads of high-yield bonds are still widening, which is different from the facts reflected in the U.S. Treasury yield. This shows that investors' pressure on the micro environment of the enterprise has increased. If the credit spread further expands, it may further squeeze the refinancing costs and profits of the enterprise. This is an extremely unfavorable forward-looking signal, which indicates that the risk of the recession of the US economy has not only not retreated, but may be increasing.

2. Macro outlook next week

The current market focus is still on the reciprocal tariffs announced by Trump on April 2, which will be the biggest variable in the near future risk market. If tariffs exceed expectations or are subject to retaliation measures, they will have a great impact on the already fragile market. In addition, the U.S. unemployment rate and non-farm employment will need to be observed next week to further assess the risk of recession.

In this case, arbitrage type quantitative fund products may serve as a potential stable component of the overall asset allocation strategy of high net worth individuals. . The current market trend is still not clear, the upward momentum is not sufficient, and external uncertainty may impact the market at any time.

Our overall view is:

Defense is preferred, the current macro environment shows a combination of "weak economy + sticky inflation + swing", and risky assets (US stocks, cryptocurrencies, high-valuation technology stocks) are facing the dual pressure of interest rate pressure and recession expectations. For active positions, it is recommended to build positions or stop profit and move downward.

From the allocation point, in addition to crypto quantitative arbitrage funds, safe-haven assets such as gold and US bonds can still be allocated in moderation.

If the reciprocal tariffs are lower than expected next week or the tariffs are increased The intensity of retaliation is lower than market expectations, and the market risk appetite may be reversed, but it will not directly form upward action. A greater macro positive stimulus is still needed.

The market is extremely fragile this week, avoid chasing ups and selling downs, and strictly abide by discipline

The key macro data next week are as follows: