Macro Weekly Report: Market Trends After the FOMC Meeting and Outlook on Equal Tariff Policies

1. Macroeconomic Review of This Week

1. Market Overview

This week's market performance has shown slight differentiation, remaining overall in a cautious stance:

• U.S. stocks edged up slightly, with the Dow Jones index performing relatively well, but overall it remains in a downward trend. Trading activity is not high, and the Put/Call ratio in the options market has decreased, indicating that some funds are beginning to buy the dip.

• In terms of commodities, gold continues to rise after breaking above $3000/oz, copper prices increased by 0.8%, with a cumulative increase of over 11% in the past three months. Crude oil prices remain around $68/barrel, while natural gas prices have fallen.

• The cryptocurrency market is sluggish, with Bitcoin fluctuating around $84,000, lacking upward momentum, while other cryptocurrencies follow suit.

2. FOMC Meeting Analysis

The Federal Reserve has made adjustments at both the strategic and tactical levels:

Strategically: Adhere to the "data-dependent" principle, avoid committing to specific rate cut timelines, and maintain policy flexibility to respond to uncertainties.

There are three key measures in terms of tactics:

1. Adjusting Inflation Expectations Management: Emphasizing the New York Fed's 5-Year Inflation Expectations data, downplaying the University of Michigan Consumer Confidence Index, and reducing market noise impact.

2. Reiterate the concept of "temporary inflation": weaken the long-term impact of tariffs on inflation, reserve space for interest rate cuts, and prevent the market from falling into stagflation panic.

3. Adjusting the Balance Sheet ( QT ) Rhythm: Despite ample liquidity, slowing down QT to address potential liquidity shocks arising from possible debt ceiling issues.

3. Changes in Liquidity and Interest Rate Markets

• Liquidity Recovery: Broad liquidity reached 6.1 trillion, with outflows from the TGA account driving liquidity improvement. The decline in the usage of the Federal Reserve's discount window indicates a reduction in market funding pressure.

• Interest Rate Market: Rate cut expectations remain stable, with a 67% probability of a cut in June and an anticipated three cuts throughout the year.

• Bond Market: Short-term interest rates are falling faster than long-term rates, resulting in a steepening yield curve, reflecting increased certainty in the market regarding interest rate cuts, but concerns about a rebound in inflation still exist.

• Credit Market: Investment-grade credit spreads have widened, credit risk has slightly increased, market risk appetite has declined, but no systemic risk signals have emerged.

2. Macroeconomic Outlook for Next Week

1. The equal tariff policy has become the focus of the market.

The reciprocal tariff policy effective from April 2 is a key focus for the market:

• Tariff intensity: The level of tax rates and coverage will affect the prices of goods, thereby impacting inflation and corporate profits. If it exceeds expectations, it may increase import costs, putting pressure on corporate profits, and the stock and bond markets may face pressure.

• Global trade frictions: If they trigger retaliatory measures from other countries, it may exacerbate supply chain tensions, drive up inflation, threaten global economic growth, and potentially lead to panic selling in the markets, reinforcing the logic of "stagflation trades."

2. Market Risk Preference

The market remains in a cautious mode, with strong hedging demand for tail risks:

• The VIX has retreated, but risk signals in the credit market have intensified, and the market has not completely shaken off panic.

• Investors tend to reduce risk exposure and increase holdings in safe-haven assets such as gold and government bonds.

3. Federal Reserve policy direction

Tariff policy has a significant impact on the Federal Reserve's stance:

• If tariffs raise inflation, the Federal Reserve may tighten policies earlier, leading to a contraction in market liquidity and increasing volatility.

• If inflation is controllable, the Federal Reserve may maintain a dovish stance, providing a buffer for the market.

4. Strategy Recommendations

The market is still in an uncertain stage of policy and risk pricing. Short-term strategies should focus on "defensive + flexible offensive" as the core, avoiding tail risks while seizing phased opportunities in the market.