Tiger Weekly Insights: 2025/03/03—2025/03/09

I. Performance and Valuation of Global Equity Indices

Data Source: Bloomberg, Complied by Tiger Brokers

II. Key Market Themes

i. Trump Sparks a U.S. Version of the "Debt Reduction Movement" – When Will the Slumping U.S. Stock Market Bottom Out?

• Trump Sparks a U.S. Version of the "Debt Reduction Movement" – When Will the Slumping U.S. Stock Market Bottom Out?**

  Recently, the sharp decline in U.S. stocks has undoubtedly been the most pressing concern for investors. Since mid-to-late February, over just a dozen trading days, the Nasdaq has plunged approximately 12%; the Philadelphia Semiconductor Index has led the downturn with a 16% drop; and the once red-hot "Magnificent Seven" tech stocks have suffered significant losses. Tesla has been cut in half, Nvidia has retraced 30% from its peak, and giants like Microsoft, Google, and Amazon have all seen pullbacks close to 20%.

• The market turmoil has been fueled in no small part by President Donald Trump. His unpredictable tariff policies, aggressive domestic reforms, and unrefined diplomatic negotiations have significantly heightened uncertainty, leading some to speculate about a potential "Trump Put"—the idea that the Trump administration would step in to stabilize the stock market if it falls too sharply. However, U.S. Treasury Secretary Bessent recently dismissed this notion outright, emphasizing that there is "NO TRUMP PUT".

• At the same time, major U.S. investment banks have been lowering their forecasts for the stock market. Morgan Stanley has revised down its U.S. economic growth expectations for the next two years, Citibank has downgraded its stock market allocation recommendation from overweight to neutral, and Goldman Sachs has cut its year-end target price for the S&P 500 by 5%.

  So, with Trump’s actions seemingly wreaking havoc on everything, what is his ultimate objective?

Data Source: Bloomberg, Complied by Tiger Brokers

• Running a country like a corporation has always been Trump's governing philosophy. Rationally speaking, he is a shrewd businessman, and as the leader of the nation, he has no reason to short his own country for profit. So, let’s set conspiracy theories aside for now. We believe that whether through tariff crackdowns or government audits, Trump is launching a U.S. version of a "debt reduction movement."

• Since the onset of the COVID-19 pandemic in 2020, the U.S. government has engaged in massive borrowing. According to official data, over the five years from 2020 to 2024, U.S. government debt has increased by $13 trillion—more than the total increase over the previous decade. Currently, the U.S. government’s debt-to-GDP ratio has soared to 120%. Coupled with the high-interest-rate environment in recent years, the debt burden on the U.S. government has become extremely severe.

  In response, the Congressional Budget Office (CBO) has issued a warning, projecting that by 2025, net interest costs will account for 3.1% of GDP—the highest level since 1940!

Data Source: Bloomberg, Complied by Tiger Brokers

• From this perspective, Trump’s actions all start to make sense. There are only two ways to reduce debt: increasing revenue and cutting expenses. On one hand, raising tariffs and selling immigration golden visas are measures to boost government income. On the other hand, internal audits and withdrawing from international agreements aim to reduce government spending. Ultimately, all these efforts are directed toward lowering the debt leverage.

  Recently, both Trump and the Treasury Secretary have stated that the U.S. economy is entering a “detox period,” signaling a shift away from a government-spending-driven economic model—one that could potentially lead to a recession.

• Against this backdrop, the Federal Reserve finds itself in a difficult position. From Trump's standpoint, the sooner interest rates are cut, the less pressure the government faces in reducing its debt. This explains why Trump has repeatedly called on the Fed to lower rates as soon as possible. However, from the Fed’s perspective, inflation remains a major concern. Last week, Fed Chair Jerome Powell stated in a public speech that the central bank is in no rush to cut rates until there is greater clarity on how Trump’s policies will impact the economy. Clearly, Powell is caught in a dilemma under Trump's pressure.

• Interestingly, for Chinese investors, debt reduction is nothing new. China began a deleveraging campaign in 2018, introduced the "three red lines" policy in 2020, and continues its debt reduction efforts to this day. The performance of Hong Kong and A-shares over the past few years may offer insights into what lies ahead for U.S. stocks.

  In summary, we believe that unless economic conditions or public opinion pose a serious threat, Trump will not halt his debt reduction efforts. During this “detox period,” even if there are occasional rebounds, the risks in U.S. equities will likely outweigh the opportunities!

Disclaimer

1. The information contained in this document is for reference only and does not constitute any financial advice or a transaction offer, solicitation, suggestion, recommendation or any guarantee for any financial product, strategy or service. You should make your own investment decisions and bear the risk of investment responsibility independently.

2. The content of this document is based on reliable data sources that the staff believed to be reliable at the time of production. The Tiger Investment Research team may adjust without prior notice. The Tiger Investment Research team does not guarantee the accuracy, reliability or completeness of the content of this document, and does not assume any responsibility for any transactions arising from the content of this article and its derivative consequences.

3. This document is confidential and non-public and can only be accessed by professionals with corresponding risk-taking capabilities and preferences. Without the prior consent of Tiger, no one may copy or distribute it in any form.