Preface
A macro novice experiences the cycle rotation for the first time in their investment career. Quietly recording the current market situation for future review.
In the China-US game, as of April 11, tariffs have been raised to over 100%, and there is no room for further increases.
Current market performance can be summarized as: US stocks down, US bonds down, dollar down.
US stocks down
The S&P 500 index has fallen from above 6000 points at the beginning of the year to around 5200 points.
Reason: Concerns about the US economic outlook and uncertainties brought by tariff policies. Investors' risk appetite has declined, leading to a sell-off of stocks.
US bonds fall
TLT saw a significant drop in April, indicating that US bonds are being sold off.
Reason: Rising inflation expectations (due to tariffs, energy, etc.) outweigh recession expectations and the weakening of expectations for Fed rate cuts.
Dollar down
The dollar has depreciated against the euro and the yen. Investors are withdrawing funds from US assets (US bonds, US stocks) and shifting to other assets (such as gold, yen, euros, etc.).
Reason: Risk aversion sentiment dominates.
A novice asks
Question 1:
Generally speaking, in a rate hike cycle, US bonds fall. So, are current US inflation expectations higher than those for economic recession?
AI's answer: Current market expectations for rising inflation are higher than for economic recession. Inflation expectations continue to rise, reaching 3.10% by February 2025, further pushed up by factors such as tariffs, while the probability of economic recession is between 15%-20%, lower than the historical average.
Question 2:
In US history, has there been a period when US stocks, US bonds, and the dollar all fell?
AI's answer: Research shows that the stagflation period of the 1970s is the most significant example in US history where the stock market, US bonds, and the dollar all fell simultaneously. High inflation, economic stagnation, and changes in monetary policy contributed to this phenomenon.
