Macro Market Observation: Economic Slowdown Expectations Dominate, Risk Assets Under Pressure

Current Market Trading Logic

Recent market trading logic mainly revolves around expectations of economic slowdown, while the risk of stagflation is emerging.

1. Interest Rate Market Signals:

   • The yield on 2-year U.S. Treasury bonds has quickly fallen, widening the gap with short-term financing rates.
   • The 10-year yield has fallen below the short-term financing rate, reflecting the market's anticipation of an economic slowdown leading to interest rate cuts.
   • Long-end interest rate inversion strengthens recession warning

2. Liquidity Contradiction:

   • The consumption of government accounts promotes marginal improvement in dollar liquidity.
   • However, risk aversion has led to funds being withdrawn from risk assets and flooding into the government bond market.
   • Forming a paradox of "liquidity easing but risk appetite contracting"

The Roots of Volatility in Risk Assets

1. Weak economic data:

   • Consumer confidence index has dropped significantly
   • Signs of a cooling job market
   • Concerns arise from potential tariff policies

2. The narrative of tech stocks is hindered:

   • Controversy over technical scalability triggered by corporate financial reports
   • The prospects of AI commercialization are being questioned
   • Technology stocks, especially those related to computing power, are under pressure.

3. Chain Reaction in the Cryptocurrency Market:

   • The arbitrage space in the futures market has narrowed
   • ETF capital outflow
   • Bitcoin and the stock market fell in sync.
   • Market sentiment indicator enters extreme fear zone

Key Game Points for Next Week

1. Non-farm payroll data will dictate the strength of the "recession trade":

   • If employment continues to exceed expectations or the manufacturing PMI continues to decline, it will reinforce expectations of economic slowdown.
   • Conversely, it may short-term fix the "soft landing" expectations.

2. Policy Risk:

   • Potential tariff policy details
   • Federal Reserve officials' statements on the interest rate cut path

3. Strategy Recommendations:

   • Overall maintain a defensive posture and wait for the opportunity to counterattack.
   • The short-term pressure in the crypto market comes from the withdrawal of leveraged funds.
   • However, the improvement of the regulatory environment and technological innovation still support long-term growth potential.

Market Game Focus: Stagflation or Recession?

Macroeconomic Environment Review

1. Changes in liquidity and interest rates:

   • Improvement in dollar liquidity on the margin, mainly due to the consumption of government accounts.
   • The interest rate market has begun pricing in expectations of interest rate cuts.
   • Long-term government bond yields reflect expectations of economic slowdown

2. Risk Market Performance:

   • Stock market volatility has intensified, and the VIX index continues to rise.
   • The consumer confidence index has significantly declined, exacerbating market concerns.
   • Tech stocks face the test of the AI narrative
   • The crypto market has experienced a significant pullback, with sentiment indicators falling into the extreme fear zone.

Future Outlook

Key data and events next week:

• Non-Farm Payroll Report
• ISM Manufacturing PMI
• Potential policy risks

The market is currently undergoing a period of expected severe adjustment, with complex gaming factors. Recommendation:

1. Stay cautious and avoid chasing highs.
2. Diversified allocation to increase defensive assets
3. Closely monitor economic data, interest rates, and policy changes

In the long term, the improvement of the regulatory environment and technological innovation in the crypto industry continue to support growth prospects, and short-term fluctuations do not change the long-term positive trend.