Market Trends and Economic Situation Analysis

Market Overview

This week, the financial markets have experienced unusual volatility:

• The stock, bond, and foreign exchange markets fell in sync, the S&P 500 index rose 5% after extreme fluctuations, the yield on 10-year U.S. Treasuries soared to 4.47%, and the dollar index fell below 100.

• Safe-haven assets show a mixed performance, with gold breaking through $3,200 per ounce, the yen and Swiss franc strengthening, and the dollar's safe-haven status being questioned.

Economic Data Analysis

• CPI data unexpectedly declined, mainly influenced by the drop in gasoline prices, but core inflation remains stubborn.

• PPI decreased by 0.4% month-on-month, indicating a coexistence of shrinking demand and rigid costs, and initially showing signs of stagflation.

• Current data has not yet reflected the impact of the new tariffs, and the market remains pessimistic about the economic outlook.

Signs of Liquidity Crisis

• The long-term bond sell-off has led to a decrease in the value of collateral, triggering forced sell-offs by hedge funds and creating a vicious cycle.

• The spread between the repurchase market interest rate and SOFR has widened, reflecting a sharp rise in financing costs and exacerbating liquidity stratification.

Policies and External Risks

• The China-U.S. tariff war escalates, with tariffs on China raised to 145%, and China's countermeasures at 125%, but the overall trend of the trade conflict is easing.

• Nearly 9 trillion US dollars of debt will mature in 2025, facing refinancing pressure, and foreign holders' sell-off may exacerbate liquidity tensions.

Future Market Outlook

1. Market shifts to defensive strategies:

• Funds flow into non-US safe-haven assets such as gold, yen, and Swiss franc.
• Long-term U.S. Treasury bonds and high-leverage equity assets face the risk of being sold off.

2. Key Monitoring Indicators:

• Will U.S. Treasury liquidity ( 10-year yield break through 5% )
• Changes in China's Bond Holdings
• Bank of Japan exchange rate intervention
• High-yield bond spread

Overall, the market is shifting from concerns about inflation to the dual risks of a U.S. dollar credit crisis and stagflation. Investors should closely monitor changes in relevant indicators and adjust their investment strategies in a timely manner.