I. Performance and Valuation of Global Equity Indices
Data Source: Bloomberg, Complied by Tiger Brokers
II. Key Market Themes
i. NVIDIA’s Stellar Earnings, Yet Stock Plummets—Is the U.S. Market Narrative Over?
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Last week, U.S. tech giant NVIDIA $英伟达(NVDA)$ released its latest earnings report, showing an astounding 78% year-over-year revenue growth and an 80% surge in profits—once again exceeding market expectations. In terms of performance, NVIDIA’s report was nearly flawless. The only notable downside was a sequential decline in gross margin, which was already anticipated, given the higher costs and lower margins of the new Blackwell architecture.
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However, despite the strong earnings, NVIDIA’s stock price fell nearly 8% in a single day, triggering a broader sell-off in the semiconductor sector and the Nasdaq. This has led some investors to question whether the U.S. tech stock narrative has come to an end. In our view, the fundamentals of the U.S. stock market have not yet shown systemic deterioration. While recent inflation and economic forecasts have been disappointing, corporate earnings remain resilient. The S&P 500’s Q4 2024 earnings season saw a 17.8% year-over-year profit increase—the highest growth rate since 2021.
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That said, there are significant macroeconomic and sentiment-driven risks! A barrage of uncertainties—including tariffs, politics, economic conditions, and inflation—combined with Trump’s unpredictable nature, has severely disrupted market sentiment. Fund flows indicate that global hedge funds have been consistently reducing their exposure to the U.S. tech sector in recent weeks. While fundamentals remain intact, macro uncertainties are currently unresolvable. Only a major positive macroeconomic surprise could shift sentiment and restore investor confidence.
Data Source: Bloomberg, Complied by Tiger Brokers
ii. Trump’s Tariff Policy in Comparison to the McKinley Era—What’s Next?
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Recently, Trump “unexpectedly” announced that a 25% tariff on Canadian and Mexican goods would take effect on March 4, alongside an additional 10% tariff on Chinese imports. This announcement triggered a market panic, causing a sharp drop in U.S. equities and a surge in the dollar. Many had assumed that Trump was merely using tariffs as a negotiating tool and would not actually implement them. However, we have repeatedly warned against underestimating Trump’s commitment to tariffs.
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During his inauguration speech in January, Trump praised former U.S. President William McKinley for his tariff-driven economic policies. Thus, revisiting McKinley’s tariff strategy is essential to understanding Trump’s approach. In 1897, at the tail end of an economic depression, McKinley enacted the Dingley Tariff Act, which raised average tariffs to nearly 50%. This policy stimulated domestic industrial expansion and became the primary revenue source for the federal government. Simultaneously, the U.S. economy rebounded and swiftly achieved a trade surplus.
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Similarly, Trump champions an “America First” trade policy, aiming to restructure global trade and restore domestic manufacturing. His tariff initiatives began during his first term, but the results were lackluster—failing to reduce the U.S. trade deficit, which instead surged to new highs by the end of his presidency.
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However, the current economic environment is vastly different from McKinley’s era. At that time, the U.S. was an industrial-driven economy at the bottom of its business cycle. High tariffs fostered industrial competitiveness without causing broad inflation, thanks to the gold standard. Today, the U.S. is a consumption-driven mature economy at the peak of its business cycle, teetering on instability. In a highly globalized supply chain, high tariffs would directly translate into inflation, disproportionately impacting American consumers. While Trump’s commitment to tariffs is unquestionable, the economic damage they could inflict—potentially leading to a recession—should not be underestimated.
Data Source: Tiger Brokers
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