I. Performance and Valuation of Global Equity Indices
II. Key Market Themes
Source: Bloomberg, Tiger Asset Management
i. PCE Commentary: Expected Data Triggers Predictable Market Sell-Off
Tariffs Hit Hard, Fed Refuses to Coordinate: Has Short-Term Pressure on U.S. Stocks Bottomed Out?
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Last week, Trump's tariff measures finally took effect, with severity exceeding all expectations—imposing the most severe "countermeasures" right from the start. First, a 10% minimum baseline tariff was set for all global trade partners, followed by additional reciprocal tariffs on specific countries: 34% on China, 20% on the EU, 46% on Vietnam, 24% on Japan, and others. This instantly plunged markets into panic. The day after the tariffs were announced, U.S. stocks plummeted, with the S&P 500 and Nasdaq indices each dropping nearly 5% in a single session.
Source: U.S. White House Official Website
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The outcome of the tariffs aligns with our earlier projections. First, never underestimate Trump’s resolve on tariffs; second, he habitually wields tariffs as a weapon for maximum pressure tactics to initiate negotiations. The cases of Canada and Mexico two months ago exemplify this pattern, and this time is no exception. He starts with a drastic move, then adds the line: 'We welcome all nations to negotiate with us.
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However, he clearly underestimated China's resolve. Last Friday, China immediately announced retaliatory tariff measures against the U.S., imposing a 34% reciprocal tariff while suspending export permits for two American poultry producers. This triggered renewed market panic, with U.S. stocks plunging in response. On that day, the S&P 500 and Nasdaq indices both tumbled nearly 5%, pushing the Nasdaq officially into a technical bear market.
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Yet misfortune never comes singly. Federal Reserve Chair Jerome Powell's speech last Friday once again dashed market hopes for a 'Fed Put'. Despite Trump's repeated public demands for immediate rate cuts and the market's desperate longing for dovish relief, Powell firmly reiterated his stance against rushing into monetary easing. He emphasized the heightened uncertainties surrounding the tariff impacts on inflation and economic growth, while maintaining that current economic conditions remain robust. Powell asserted that the Fed would await clearer signals before considering any policy adjustments.
Source: Bloomberg, Tiger Asset Management
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At this juncture, rather than attempting to predict every detail of Trump's policies, it is more critical to understand the overarching environment and directional shifts. Since the beginning of this year, our weekly market analysis has consistently highlighted three core uncertainties for U.S. equities: tariffs, interest rate cuts, and political dynamics. Clarifying the current positioning of these factors and their potential trajectories will be key signals for whether the U.S. stock market can stabilize.
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On Tariffs: The worst-case scenario may have already materialized. Most countries will ultimately opt for negotiation and compromise, with only China and Europe possessing the leverage to engage in strategic rivalry with the U.S. After this week, even if China and the U.S. escalate retaliatory measures further, the actual economic impact will diminish significantly, as conditions are already near the floor.
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On Rate Cuts: The current probability of a Fed rate cut in May stands at nearly 50%, with markets pricing in four cuts this year. Powell has consistently emphasized a data-dependent approach. If this week’s CPI and PPI data show signs of improvement, it could provide a substantial near-term boost to market confidence.
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On Politics: Internal oversight led by Musk shows signs of easing. Trump has publicly acknowledged that Musk will resign from his government role in the near term, signaling a potential shift in policy priorities.
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In conclusion, we believe the market is currently in a phase of intense volatility driven by U.S.-China strategic rivalry, with the core contradiction being stagflation fears compounded by policy confrontations. Over the medium to long term, this competitive landscape remains unchanged, and the trajectory of market evolution is still uncertain. However, in the short term, market sentiment may have bottomed out, and a bullish rebound awaits only a clear positive catalyst.
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