Market Trends Overview

Market Anomaly Signals

This week, the financial market has witnessed a rare phenomenon of simultaneous declines in stocks, bonds, and foreign exchange.

• The stock market experienced wild fluctuations, with the S&P 500 index rising by 5% during the week.
• The bond market plummeted, with the 10-year Treasury yield soaring to 4.47%.
• The US Dollar Index fell below the 100 mark.

Divergence in the performance of safe-haven assets:

• Gold price breaks through $3200/ounce
• The Japanese yen and Swiss franc are strengthening
• The traditional safe-haven status of the US dollar is being questioned.

Economic Data Contradictions

Early signs of stagflation appear:

• The overall CPI has declined, primarily due to the drop in gasoline prices.
• Core inflation remains high, with housing and food prices continuing to rise.
• PPI decreased by 0.4% month-on-month, reflecting a coexistence of shrinking demand and rigid costs.

It is worth noting that the current data has not yet reflected the impact of the new tariffs, and the market is reacting pessimistically.

Liquidity Crisis Looming

The U.S. Treasury market is experiencing a selling spiral:

• Long-term bond prices plummet
• The value of collateral shrinks
• Hedge funds are forced to sell
• The yield rate continues to rise

Repurchase market pressure increases:

• BGCR and SOFR spread widens
• Reflecting the sharp rise in collateral financing costs
• Liquidity stratification intensifies

Policies and External Risks

Trade Tariff Game:

• China's tariffs rise to 145%
• China's counter-tariffs raised to 125%
• Although there has been some local easing of the trade war, long-term risks still exist.

Pressure of refinancing US debt:

• Nearly 9 trillion US debt will mature in 2025
• If foreign holders sell off, it will exacerbate liquidity pressure.

Market Outlook for Next Week

Market Shift to Defensive Logic

• The credibility of the US dollar is being questioned, with funds shifting towards non-USD safe-haven assets such as gold, yen, and Swiss franc.
• Stagflation trading logic dominates, long-end U.S. Treasuries and high-leverage equity assets face selling risks.

Key Monitoring Indicators

Key points to focus on:

• The liquidity of U.S. Treasuries, especially whether the 10-year yield will break 5%
• Changes in China's holdings of U.S. Treasury bonds
• Direction of the Bank of Japan's exchange rate intervention
• High-yield bond spread trend

The market is still in an uncertain state, and investors should remain cautious and closely monitor changes in various data indicators.