Macroeconomic Market Weekly Report: Searching for Turning Points and Interpreting Credit Market Signals

1. Macroeconomic Review of This Week

1. Market Overview

This week, the market continued to adjust around the expectations of the Federal Reserve's interest rate cuts and the slowdown in economic growth. The main performances are as follows:

• The three major U.S. stock indices generally retreated, while the utility sector rose against the trend, indicating a shift of funds towards defensive assets. The VIX index remains above 20, reflecting cautious market sentiment.

• The commodity market is clearly differentiated. Gold has broken through $3000 per ounce to reach a new high, reflecting an increase in safe-haven demand. Copper prices have risen by 3.9%, indicating that manufacturing demand remains. Oil prices are relatively stable, but net futures positions have decreased, reflecting market concerns about global demand growth.

• The cryptocurrency market is undergoing an overall adjustment. Bitcoin's volatility has narrowed, and short-term selling pressure has eased. Altcoins are performing weakly, reflecting a decline in risk appetite. The market capitalization of stablecoins is growing, but net inflows are slowing, indicating a cautious trend in market liquidity.

2. Economic Data Analysis

• Both CPI and PPI data fell short of expectations, strengthening market expectations for a rate cut by the Federal Reserve this year.

• The University of Michigan Consumer Sentiment Index and inflation expectations data show partisan divergence, increasing market uncertainty.

• The NFIB Small Business Optimism Index has declined for three consecutive months, reflecting ongoing concerns among small and medium-sized enterprises about the uncertainty of trade policies.

3. Changes in Liquidity and Interest Rate Markets

• The Federal Reserve's balance sheet remains above $6 trillion, with the outflow from the TGA account being the main reason.

• The federal funds futures market has very low expectations for a rate cut in March, but still anticipates 2-3 rate cuts this year.

• The U.S. credit market is experiencing changes, with corporate credit spreads widening and CDS rising, indicating increasing market concerns about credit risk.

2. Macroeconomic Outlook for Next Week

1. Global Stock Market Strategy

• Reduce high-beta asset allocation and increase defensive sectors such as utilities, healthcare, and consumer staples.
• Pay attention to the opportunities of being mistakenly killed, especially in blue-chip stocks with high dividends and stable cash flow.
• Appropriately increase the allocation to the Asia-Europe market to hedge against uncertainties in the US market.

2. Cryptocurrency Market Strategy

• Bitcoin still has investment value in the long term and can be added to during dips.
• Reduce exposure to the risk of altcoins and maintain a wait-and-see attitude.
• Closely monitor the flow of stablecoin funds to assess the liquidity conditions in the market.

3. Credit Market Strategy

• Reduce the allocation of low-rated corporate bonds and increase investment-grade bonds or U.S. medium to long-term government bonds.
• Be vigilant about the impact of the US debt deficit issue on market sentiment.

4. Key Focus Areas

• Does the FOMC meeting dot plot indicate expectations for 2-3 rate cuts?
• If the Federal Reserve announces a pause in QT, it could have a significant impact on the market.
• Pay attention to retail data and global central bank dynamics.

Overall, the market is still searching for a new equilibrium. Investors need to remain cautious while seizing potential opportunities from mispriced quality assets. Changes in the credit market are particularly worth noting, as an important leading indicator for risk assets, its inflection points often signal changes in risk appetite.