Macroeconomic Weekly Report: Market Adjustment Continues, Credit Risk Needs Attention

1. Macroeconomic Review of This Week

1. Market sentiment is cautious, and defensive assets are favored.

This week, the three major U.S. stock indices generally retreated, with the Dow Jones Industrial Average falling by 3.1%, the Nasdaq Index dropping by 2.6%, and the Russell 2000 Index declining by 1.8%. The utilities sector rose against the trend by 1.4%, becoming the only industry to gain, reflecting a shift of funds toward defensive assets. The VIX volatility index remains above 20, indicating that the market is in a cautious adjustment phase.

2. Diversification of the commodity market, risk aversion sentiment is rising.

Gold broke through $3,000 per ounce, reaching a historic high, reflecting increased safe-haven demand. Copper prices rose by 3.9%, indicating that there is still some demand support in the manufacturing sector. Crude oil prices stabilized around $67, but net futures positions decreased by over 9.6%, suggesting a weak market outlook for global demand growth. Natural gas prices continued to decline, affected by oversupply and weak industrial demand.

3. The cryptocurrency market adjusts synchronously, and Bitcoin still has long-term allocation value.

The cryptocurrency market as a whole is adjusting in sync with the US stock market. Although Bitcoin is on a downward trend, its volatility has narrowed, indicating a relief in short-term selling pressure. Altcoins are showing weak performance, reflecting a decline in market risk appetite. The market capitalization of stablecoins continues to grow, but net inflows are slowing down, suggesting a cautious trend in market liquidity.

4. The impact of tariffs is becoming apparent, and the global supply chain is adjusting rapidly.

The Baltic Dry Index (BDI) continues to rise, indicating strong shipping demand in the Asia-Europe region, and manufacturing capacity may be accelerating its shift overseas. The U.S. transportation index has fallen by 6.5%, reflecting weak domestic demand. This divergence shows that under the influence of tariff policies, the global supply chain is undergoing regional restructuring, putting pressure on the U.S. domestic economy.

5. Inflation data cools down, but inflation expectations diverge.

CPI and PPI data fell short of expectations, reinforcing market expectations for interest rate cuts. However, the University of Michigan's consumer inflation expectations have risen, showing significant partisan divergence. The divergence between actual data and expectations has increased market uncertainty.

6. Liquidity marginally loosened, but credit market risks intensified.

The balance of the U.S. Treasury General Account (TGA) is flowing out, and the usage of the Federal Reserve's discount window has decreased, indicating that the overall macro liquidity is stabilizing. However, corporate credit spreads have widened, with North American investment-grade credit default swaps (CDX IG) rising by over 7%, and U.S. sovereign CDS has also increased, reflecting a growing concern in the market regarding corporate and government debt.

2. Macroeconomic Outlook for Next Week

1. Pay attention to the FOMC meeting, retail data, and global central bank dynamics

Next week's market focus will be on the Federal Reserve FOMC meeting. Key points include:

• Does the lattice chart indicate expectations for 2-3 rate cuts?
• Powell's speech inclination
• Is there an announcement to pause quantitative tightening (QT)

In addition, retail sales data and the decisions of central banks in other major economies are also worth paying attention to.

2. Investment Strategy Recommendations

• US Stocks: Reduce allocation to high beta assets, increase holdings in defensive sectors, and pay attention to mispriced opportunities in quality blue-chip stocks.
• Crypto Market: Bitcoin can be held for the long term, reduce altcoin allocation, and pay attention to the liquidity changes of stablecoins.
• Credit Market: Reduce exposure to high-leverage corporate bonds, increase allocation to high-rated bonds, and be cautious of the risks associated with the US debt deficit.
• Pay attention to the credit market recovery or clearer signals of easing from the Federal Reserve as potential turning points.

Overall, the market is still looking for a new balance point. Investors need to remain cautious while seizing potential opportunities in quality assets that may be mispriced.