I. Performance and Valuation of Global Equity Indices
Source: Bloomberg, Tiger Asset Management
II. Key Market Themes
i. PCE Commentary: Expected Data Triggers Predictable Market Sell-Off
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Last Friday, the U.S. February PCE inflation data unsurprisingly surged again. The core PCE rose by 0.4% month-on-month and 2.8% year-on-year, both exceeding market expectations. Consequently, the three-month and six-month annualized moving averages of core PCE reversed upward to 3.58% and 3.08% respectively, once again moving further away from the Federal Reserve's long-term 2% inflation target.
Source: Bloomberg, Tiger Asset Management
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Meanwhile, U.S. household personal income rose by 0.8% month-on-month, significantly exceeding expectations; however, personal spending growth was only 0.4%, falling short of forecasts. Notably, expenditures on personal services declined sharply. This indicates that while household incomes have remained temporarily unaffected, consumer spending has turned cautious due to tariff expectations and economic slowdown concerns. The data aligns with this trend – the U.S. household savings rate has been steadily rising throughout the year.
Source: Bloomberg, Tiger Asset Management
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On the other hand, the March final reading of the University of Michigan Consumer Survey added fuel to the fire – consumer sentiment remained sluggish, while both short-term and long-term inflation expectations continued to climb to alarming levels. These dismal hard data and soft data directly contradicted Powell's confidence previously expressed at the FOMC meeting, casting doubt on the reliability of the 'transitory inflation' narrative.
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As anticipated, U.S. stocks have entered their second wave of sell-offs since last Thursday, with the Nasdaq Composite now approaching its previous low and showing no signs of stabilization. Meanwhile, capital flight has intensified. According to Goldman Sachs and JPMorgan data, U.S. equities saw net outflows exceeding USD 20 billion last week. Notably, Nasdaq futures witnessed even more extreme capital flight – cumulative net outflows over the past four weeks reached 2.6 standard deviations beyond the one-year average. Institutional investors and hedge funds are also aggressively unwinding positions.
Source: J.P.Morgan Equity Derivatives Strategy, CFTC, Bloomberg Finance L.P
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In recent weeks, even as U.S. stocks experienced a technical rebound with numerous institutions proclaiming a market turnaround, we have maintained our bearish stance – repeatedly highlighting the absence of macroeconomic improvements and consistently warning investors to remain vigilant against risks. For our regular readers, this round of market decline should come as no surprise.
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At this juncture, our fundamental thesis on U.S. equities remains unchanged – we maintain a pessimistic outlook. This week's manufacturing and services PMI, nonfarm payrolls, and reciprocal tariff measures each constitute critical market-moving events. Current market sentiment reflects a delicate balancing act: economic data that's too strong spook investors with delayed rate cuts, while weak indicators fuel stagflation fears. Only a Goldilocks scenario could partially assuage market anxieties, though such equilibrium appears increasingly elusive.
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Furthermore, we caution against placing excessive bets on the 'Trump put' while acknowledging the eroding credibility of the 'Fed put'. Investors should focus intently on whether post-NFP speeches by Powell and Waller can restore market confidence, particularly following Friday's nonfarm payrolls release.
Disclaimer
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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.
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