Tiger Weekly Insights: 2025/04/21—2025/04/27

I. Performance and Valuation of Global Equity Indices 

Data Sources: Bloomberg, Tiger Asset Management

II. Key Market Themes

i. Sentiment Recovery and Market Rebound: Is a U.S. Stock Reversal Imminent?

• Over the past week, three major uncertainties weighing on U.S. stocks have eased:​​

1. ​​On tariffs​​: Although U.S.-Japan negotiations reportedly stalled, a preliminary framework has emerged between the U.S. and India. Additionally, Trump softened his confrontational stance toward China, repeatedly hinting that the U.S. is negotiating tariff reductions with Beijing — a claim firmly denied by Chinese officials

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2. ​​Rate cut optimism​​: Federal Reserve Governor Waller, seen as a potential successor to the Fed Chair, reiterated that "tariffs' inflationary impact is temporary" and emphasized that the Fed would consider rate cuts if corporate layoffs escalate due to tariffs

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3. ​​Political stability​​: Trump backtracked on his earlier threats to interfere with the Fed, stating he has "no intention to fire Powell"

   . Meanwhile, Elon Musk announced during Tesla’s earnings call that he will leave the Department of Government Efficiency (DOGE) in May to refocus on Tesla

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​​Driven by these positive developments​​, macro pressures on U.S. equities have diminished, with the S&P 500 and Nasdaq rebounding sharply to reclaim their previous highs.

• Moreover, the University of Michigan Consumer Sentiment Index — often regarded by the Federal Reserve as 'soft data' — delivered a mild positive surprise. The final results released last Friday showed that while consumer confidence declined again and short- to medium-term inflation expectations surged, these metrics improved compared to preliminary readings and outperformed market expectations. In other words, despite worsening consumer sentiment on inflation and the economy, the deterioration was less severe than markets had feared.

• Overall, the primary market narrative remains centered on tariffs, with corporate earnings and financial results serving as secondary factors. For instance, despite Netflix's stellar earnings report, its stock experienced a 'sell-the-news' reaction the following day, only surging later when tariff-related uncertainties eased. Similarly, Tesla’s Q1 results were far worse than expected, but optimism about Elon Musk refocusing on the company still drove a post-earnings rally. These recent events confirm that Trump’s policy pivot points are closely tied to U.S. Treasury yields. When long-term yields approach 5%, he tends to intervene with market-friendly signals.

• The current situation is thus in a delicate balance. The market's previously dismissed 'Trump Put' has been unexpectedly triggered, while the 'Fed Put' — which investors had heavily relied on — remains semi-suspended. As Governor Waller noted last week, the full economic impact of tariffs will not materialize until the second half of the year

  . With more hard data on inflation and employment to be released, the Federal Reserve is likely to accelerate consensus-building internally. Regardless, the worst-case scenario for the near term appears to have passed.

• However, this does not mean the vulnerabilities in U.S. equities have been fully reversed. Last week's gains in the S&P 500 and Nasdaq should be viewed as a short-term technical rebound from oversold conditions, with both indices still entrenched in a broader consolidation range when zoomed out. The magnitude and duration of the rebound will largely hinge on three factors: progress in tariff negotiations, the Federal Reserve's stance on rate cuts, and corporate earnings guidance. This week marks a critical juncture, with Wednesday’s PCE inflation data, Thursday’s PMI, and Friday’s nonfarm payrolls report, coupled with earnings releases from tech giants like Apple, Amazon, and Microsoft. Should inflation undershoot expectations, employment data show weakness, and major companies deliver strong earnings and optimistic guidance, U.S. equity indices could see a further 10% upside in their rebound trajectory.

• From a long-term perspective, the market has yet to fully price in the impact of tariffs, with significant uncertainty remaining about their ultimate trajectory and consequences. Currently, the probability of the U.S. entering a recession within the next year has risen to 40%. According to UBS historical analysis, if the U.S. experiences a shallow recession, the S&P 500 could see an average decline of just 11%; however, in a deep recession scenario, the average drop would reach 34%! Echoing this view, Bank of America argues that unless three conditions are met simultaneously—successful U.S.-China tariff negotiations, Fed rate cuts, and sustained consumer resilience—the mantra 'sell the rally' will likely dominate market behavior for U.S. stocks in the near term.

• We share a similar view: U.S. equities may experience short-term rebounds and volatility, potentially of significant magnitude, but the medium- to long-term outlook remains highly uncertain. As long as Trump persists with his ultimate goals of reshoring manufacturing and reducing debt burdens, a weaker U.S. dollar will likely persist as a structural trend. Under this scenario, U.S. stocks could underperform for years to come, while equities in emerging markets may present superior opportunities.

• Disclaimer

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