Macro Weekly Report: Market Pressure Intensifies, Follow the Implementation of Reciprocal Tariff Policies

1. Macroeconomic Review of This Week

1. Market Overview

This week, the overall performance of the risk asset market has been weak, continuing a volatile trend. Apart from gold continuing to rise, the US stock market, cryptocurrencies, and the commodities market generally weakened. In particular, after a certain political figure expressed a tough stance on auto tariffs, the market clearly deteriorated in the latter half of the week.

The cryptocurrency market has been generally calm this week but with weak momentum. Although the U.S. House of Representatives has introduced a new regulatory bill for stablecoins, the continued loose policy direction has not been able to immediately reverse the market's sluggish situation. Against the backdrop of overall poor liquidity and ongoing macro uncertainties, the market still needs to wait for new direction after the implementation of the reciprocal tariff policy.

2. Economic Data Analysis

The latest GDPNow forecast for the United States' first-quarter GDP is -1.8%, unchanged from last week. Notably, the model underwent an official adjustment that included gold imports and exports in its considerations. The adjusted model predicts that the growth rate of real private domestic investment for the first quarter will drop from 9.1% to 8.8%.

From multiple data points, the trend of weakening in the U.S. economy is evident, but there is currently no hard data that clearly indicates a recession. However, multiple data validations from the labor market and credit market suggest that the risk of recession has indeed increased.

In terms of the labor market, although the initial claims for unemployment benefits released this week were slightly lower than expected, the long-term trend indicates a distinct weakness in the labor market. Data shows that out of 387 metropolitan areas in the United States, 290 are experiencing rising unemployment rates. Notably, the number of people continuously applying for unemployment benefits in a certain region is currently at its highest level since 2021.

The PCE data released this week showed that the year-on-year and month-on-month PCE for February both exceeded expectations. Meanwhile, the month-on-month personal consumption expenditure for February was 0.4%, which was lower than expected. This reflects that, on one hand, consumer spending is declining, while on the other hand, inflation remains high, making it difficult to navigate the last mile.

3. Liquidity and Interest Rates

This week, the Federal Reserve's broad liquidity margin continues to improve, remaining around 6 trillion as of March 19.

From the perspective of the interest rate market, the government bond yield curve shows a clear "bear steepening," with the upward slope of long-term bonds significantly higher than that of the short end. According to the latest results of interest rate derivatives trading, the probability of a rate cut in June has decreased compared to last week, while the spread of 10-year inflation-protected bonds has slightly increased, indicating that the market still harbors concerns about inflation.

It is worth noting that the credit spread of high-yield bonds is still widening, which is different from the situation reflected by U.S. Treasury yields. This indicates that investors are facing increased pressure from the microeconomic environment of companies. If the credit spread continues to widen, it may further squeeze corporate refinancing costs and profits, which is an extremely unfavorable forward-looking signal, suggesting that the risk of an economic recession in the United States may be increasing.

2. Macroeconomic Outlook for Next Week

The current market focus remains on the announced reciprocal tariff policy on April 2, which will be the biggest variable for the risk market in the near term. If tariffs exceed expectations or retaliatory measures are taken by countries subjected to increased tariffs, it will have a significant impact on the currently fragile market. In addition, attention should be paid to next week's U.S. unemployment rate and non-farm payroll data to further assess recession risks.

The overall view is as follows:

1. Defense first. The current macro environment presents a combination of "weak economy + sticky inflation + policy oscillation," with risk assets facing dual pressure from interest rate constraints and recession expectations. It is recommended to adopt a conservative strategy for active positions.

2. From a configuration perspective, risk-hedging assets can be moderately configured.

3. If the reciprocal tariffs next week are lower than expected or the retaliation level from the impacted countries is lower than market expectations, market risk appetite may reverse somewhat, but it will not directly create upward momentum. Greater macroeconomic stimuli are still needed.

4. The market's vulnerability is extremely high this week, and it is recommended to avoid chasing highs and cutting losses, strictly adhering to discipline.