Market Overview and Outlook

Market Anomaly Signals

This week, the financial markets have shown multiple abnormal signals:

1. The phenomenon of simultaneous declines in stocks, bonds, and currencies is evident. U.S. stocks experienced significant volatility, with the S&P 500 index rising as much as 5% during the week. Meanwhile, the yield on 10-year U.S. Treasuries soared to a high of 4.47%. The U.S. dollar index also rarely fell below the 100 mark.

2. The performance of safe-haven assets has diverged. Gold surged past $3200 per ounce, and traditional safe-haven currencies like the yen and Swiss franc strengthened. However, the dollar's status as a safe haven has been shaken.

Economic Data Contradictions

1. Inflation data shows early signs of stagflation. The CPI has overall declined, mainly due to falling gasoline prices. However, housing and food prices within core inflation are still rising.

2. PPI month-on-month -0.4%, reflecting a situation where demand contraction and cost rigidity coexist.

3. It should be noted that the current data has not yet reflected the impact of the newly added tariffs, and the market's pessimistic expectations have already been priced in.

Liquidity Pressure Emerges

1. The plunge in long-term bonds triggered a chain reaction, with the decline in collateral value forcing hedge funds to sell off, further driving up yields.

2. The pressure in the repurchase market has increased, and the spread between BGCR and SOFR has widened, reflecting a sharp rise in collateral financing costs and an exacerbation of liquidity stratification.

Policies and External Risks

1. The tariff game continues. Tariffs on China have risen to 145%, and China's countermeasures have reached 125%. Although the trade war has seen some localized easing, the long-term risks remain.

2. In 2025, there will be refinancing pressure with about $9 trillion of US debt maturing, and foreign holders' sell-offs will exacerbate liquidity tightness.

Market Outlook for Next Week

1. The market is shifting to a defensive logic, with capital flowing into non-USD safe-haven assets such as gold, yen, and Swiss franc.

2. Stagflation trading may dominate the market, with long-end U.S. Treasuries and high-leverage equity assets facing sell-off risks.

3. Focus on indicators such as U.S. Treasury liquidity, changes in Chinese bond holdings, Bank of Japan currency intervention, and high-yield bond spreads.

4. Cryptocurrencies are influenced by the US dollar, lacking upward momentum in the short term, and a neutral stance is recommended.

5. Pay attention to changes in tariff policies; if U.S. Treasury yields exceed 5%, it may trigger a deeper credit crisis.