I. Performance and Valuation of Global Equity Indices
Data Source: Bloomberg, Complied by Tiger Brokers
II. Key Market Themes
i. Inflation Data Improves, Consumption Continues to Surge, Will US Stocks Begin to Rebound or Continue to Decline?
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Last week, the US February inflation data came in below market expectations across the board, slightly easing the tense market sentiment. Specifically, both CPI and core CPI increased by 0.22% and 0.23% month-over-month, respectively, both slightly below the expected 0.3%. Moreover, PPI and core PPI surprisingly showed a rare month-over-month decline.
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However, immediately after, Nick, the Fed's mouthpiece, along with major investment banks, raised their forecasts for the February PCE. Currently, Wall Street's expectations for the month-over-month increase have surpassed last month's figures and continue to trend upwards. Meanwhile, US stocks experienced a roller-coaster ride on the same day, initially rising before falling.
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Although the CPI data appears favorable at first glance, a closer look at the details reveals that the most significant drop was in the transportation sector, particularly in airfare prices. However, this component is highly volatile and lacks stickiness, and it does not directly translate into the PCE statistics. Additionally, the decline in PPI is largely attributed to the weakening of energy prices, while other components factored into the PCE have not shown notable improvement.
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Moreover, the February inflation data does not reflect any impact from Trump's tariff policies, which happen to be the market's greatest concern recently. Therefore, even though the inflation figures seem lower, the overall interest rate curve has shifted upwards, and expectations for rate cuts remain at 2-3 times, virtually unchanged from before. We believe that this CPI/PPI release has had little impact on the market narrative and only serves to temporarily soothe market sentiment.
Data Source: CME Group, Tiger Asset Management
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Meanwhile, the University of Michigan’s consumer report released last Friday further confirmed the weakening U.S. consumer landscape. The March Consumer Sentiment Index plummeted to 57.9, breaching its lowest level since November 2022 and falling far below both prior readings and market expectations. More critically, while consumer confidence erodes, short- and long-term inflation expectations continue to climb. The 5-year inflation outlook has now surged to nearly 4%, hitting a decade high and significantly overshooting the Fed’s long-term inflation target.
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An intriguing parallel development is emerging in the retail sector. Shares of retail giants Walmart$沃尔玛(WMT)$ and Costco$好市多(COST)$ plunged over 10% in March alone. Costco’s latest earnings report revealed net profits below expectations, while Walmart—despite decent results—significantly lowered its 2025 guidance, projecting annual net sales growth of just 3%-4%, a marked deceleration from 2024 levels. Management teams across major retailers have also publicly voiced heightened concerns about tariff impacts.
Data Source: University of Michigan, Tiger Asset Management
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As outlined in our previous weekly observations, Trump’s core objective is to ‘manage the debt burden’—he can afford to ignore stock market volatility as long as it doesn’t severely destabilize the economy or his polling numbers. Currently, the three major overhangs weighing on U.S. equities—tariffs, inflation, and political risks—remain entirely unresolved, with no signs of alleviation. If this persists, each factor could erode corporate earnings expectations, which would prove devastating.
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In the near term, markets will focus on this week’s Fed FOMC meeting and NVIDIA$英伟达(NVDA)$ ’s GTC conference—monitoring whether Powell signals an early slowdown or halt to quantitative tightening, and whether Jensen Huang unveils fresh catalysts. However, over a longer horizon, we caution against underestimating the market’s heightened fragility: a single negative catalyst could shatter confidence at this juncture. Consequently, we maintain our underweight stance on U.S. equities and advise continued caution.
Data Source: Bloomberg, Complied by Tiger Brokers
Disclaimer
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