Macro Market Weekly: Risk Assets Under Pressure Ahead of Tariff Implementation

1. Macroeconomic Review of This Week

1. Market Overview

This week, the overall performance of the risk asset market has been weak. Except for gold continuing its upward trend, the stock market, cryptocurrency, and commodity markets have been relatively sluggish. Particularly after the announcement of comments related to auto tariffs, the market clearly worsened in the latter half of the week.

The cryptocurrency market has been generally calm this week, but the momentum is weak. Although a new stablecoin bill has been introduced in the U.S. House of Representatives, the favorable policy has not immediately changed the sluggish market situation. Against the backdrop of poor liquidity and ongoing macroeconomic uncertainty, the market seems to be waiting for new directions after the tariff policies are implemented.

2. Economic Data Analysis

The latest prediction for the GDP growth rate in the first quarter by the GDPNow model remains at -1.8%. Notably, the model has made methodological adjustments to include gold imports and exports in its considerations. After adjustments, the forecast for the actual growth rate of private domestic investment in the first quarter has been revised down from 9.1% to 8.8%.

In terms of the labor market, although the number of initial jobless claims was slightly lower than expected at the beginning of the week, long-term data shows a clear weakness in the labor market. Among the 387 metropolitan areas in the United States, 290 are experiencing an upward trend in unemployment rates. In particular, the number of ongoing unemployment benefit claims in Washington D.C. is at its highest level since 2021.

The February PCE data shows that inflationary pressures still exist, with both the year-on-year and month-on-month rates exceeding expectations. At the same time, the month-on-month personal spending for February is 0.4%, which is below expectations. This reflects the current situation of weak economic performance coexisting with high inflation.

3. Liquidity and Interest Rate Analysis

The Federal Reserve's broad liquidity marginally continues to improve, but remains around $6 trillion. The yield curve of government bonds shows a distinct "bear steepening" pattern, with the slope of long-term bonds rising more than that of short-term bonds. The market still holds concerns about inflation, and the expectation of a rate cut in June has decreased compared to last week.

The pressure in the credit market continues to increase, and the credit spread of high-yield bonds continues to widen. This indicates that investors are increasingly concerned about the pressures on the microenvironment of businesses. If the spread continues to widen, it may squeeze the refinancing costs and profits of companies, which is a forward-looking signal of increased risk of economic recession.

2. Macroeconomic Outlook for Next Week

1. Key Events and Data

The most important market variable next week is the announcement of the reciprocal tariff policy on April 2. If the tariffs exceed expectations or face retaliatory measures, it could have a significant impact on the currently fragile market.

In addition, attention should be paid to the unemployment rate and non-farm payroll data for March in the United States to further assess recession risks.

2. Investment Strategy Recommendations

The current macroeconomic environment presents a "weak economy + sticky inflation + policy swings" combination, and the following strategies are recommended:

• Defensive Priority: Risk assets face dual pressures from interest rate stress and recession expectations, it is recommended to cautiously build positions or take profits appropriately.
• Diversified allocation: Consider moderately allocating to safe-haven assets such as gold and U.S. Treasuries.
• Stay vigilant: If tariff policies fall short of expectations or retaliatory measures are mild, market risk appetite may improve in the short term, but greater macroeconomic incentives are still needed to create upward momentum.
• Strictly adhere to discipline: The market is highly vulnerable, avoid chasing highs and selling lows.

Overall, the market is currently in a wait-and-see mode, awaiting the implementation of tariff policies and the release of employment data. In the short term, it is necessary to remain cautious and patiently wait for clearer market signals to emerge.