US stocks: Predictable Data, Predictable Sell-off

Performance of Global Equity Indices(in US Dollar)

• Last week, global equity assets performed weakly, with major stock indices around the world experiencing varying degrees of decline. The global technology sector was hit the hardest, with both the Hang Seng Tech Index and the Nasdaq Index falling by more than 2% over the week. In contrast, China’s Shanghai Composite Index and CSI 300 saw relatively smaller losses. Year-to-date, stocks in non-U.S. countries continue to significantly outperform U.S. equities.

• Meanwhile, U.S. macro data has delivered one blow after another. The February PCE data once again exceeded expectations, while personal spending growth came in below forecasts. On top of that, the University of Michigan consumer survey delivered another shock—consumer confidence dropped while inflation expectations rose, casting doubt on the Fed’s narrative of “transitory inflation.” The recent decline in U.S. stocks is fully in line with our expectations, and we believe that risk awareness remains crucial going forward.

• This week, key areas of focus include Trump’s reciprocal tariff policy, as well as PMI data for manufacturing and services, non-farm payrolls, and the unemployment rate.

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Key Market Themes

PCE Review: Predictable Data, Predictable Sell-off

• Last Friday, U.S. February PCE inflation data came in hot as expected, with core PCE rising 0.40% month-over-month and 2.8% year-over-year, both surpassing market expectations. As a result, the 3-month and 6-month annualized moving averages of core PCE turned upward again, reaching 3.58% and 3.08%, respectively—once again diverging from the Fed’s long-term 2% inflation target.

• At the same time, personal income rose 0.8% MoM, well above expectations. However, personal spending grew by only 0.4%, falling short of estimates. Notably, spending on services dropped sharply. This indicates that while incomes have not yet been impacted, rising concerns about tariffs and a weakening economy are prompting more cautious consumer behavior. The data aligns with this view—the U.S. household savings rate has been rising steadily since the start of the year.

• In addition, the final March reading of the University of Michigan consumer sentiment index poured more cold water on the market. Sentiment continued to deteriorate, and short- and long-term inflation expectations kept climbing, casting further doubt on the Fed’s “transitory inflation” narrative and undermining the confidence Powell tried to establish during the FOMC meeting.

• As expected, U.S. equities began a second leg down last Thursday, with the Nasdaq approaching previous lows, showing no signs of stabilization. Correspondingly, capital has begun to vote with its feet. According to Goldman Sachs and JPMorgan, U.S. equities saw over $20 billion in net outflows last week. Nasdaq futures net outflows over the past four weeks were extremely severe, falling 2.6 standard deviations below the 1-year average. Institutions and hedge funds have also been aggressively selling.

• In recent weeks, even as U.S. markets staged a brief rebound and some institutions proclaimed signs of recovery, we remained firmly bearish, repeatedly highlighting the lack of macro improvement and urging caution. For those who have been following our updates, this current correction should come as no surprise.

• As of now, our bearish outlook on U.S. equities remains unchanged. We still believe the outlook is unfavorable. This week’s key events include the PMI reports for manufacturing and services, non-farm payrolls, and Trump’s reciprocal tariff policy—each of them carries significant market weight.

  Market sentiment is also becoming increasingly fragile: if the data is too strong, it raises fears of delayed rate cuts; if it’s too weak, concerns shift to stagflation. Only a perfectly balanced outcome may offer temporary relief to nervous investors.

• Furthermore, we believe investors should not place too much hope on a "Trump put", and the reliability of a Fed put is also weakening. Keep a close eye on Friday’s non-farm payrolls and whether speeches from Powell and Waller can offer any reassurance to the markets.