Tiger Weekly Insights: 2025/03/17—2025/03/23

I. Performance and Valuation of Global Equity Indices

Data Source: Bloomberg, Tiger Asset Management

II. Key Market Themes

i. FOMC Commentary: Slowing Balance Sheet Runoff Fails to Mask Stagflation Gloom; Forced Composure Unable to Alleviate Macroeconomic Concerns.

• Last Wednesday, the Federal Reserve's FOMC meeting unfolded as scheduled, with most actions aligning with market expectations. The central bank maintained its policy rate unchanged, while Chair Powell reiterated the Fed's position of being in no rush to cut rates. Although the dot plot continues to signal two rate cuts within this year, policymakers have adopted a more cautious stance compared to December 2022, with over 40% of officials now supporting either a single rate cut or none at all for 2024.

• Correspondingly, the Fed revised downward its economic growth projections and upwardly adjusted inflation expectations in the Summary of Economic Projections (SEP). These technical adjustments largely matched market anticipations and mirrored recent shifts in market sentiment. Notably, policymakers refrained from stealthily raising the long-term inflation forecast, maintaining the 2.0% target for core PCE inflation as the enduring policy anchor.

Data Source: Bloomberg, Federal Reserve official website, Tiger Asset Management

• Two particularly noteworthy and moderately positive developments emerged from the meeting:

• First, the Federal Reserve has officially slowed down the pace of shrinking its balance sheet, and the monthly redemption limit of treasury bond has been reduced from 25 billion to 5 billion; But at the press conference, Powell called it a "common sense adjustment" and did not send any signal.

• Second, the Chair directly challenged the validity of the much-discussed University of Michigan Consumer Survey data in Q&A sessions. He emphasized the tenuous correlation between such survey-based metrics and actual economic activity, reaffirming the Fed's commitment to data-dependent policymaking anchored in hard economic indicators.

ii. Looming Reciprocal Tariffs May Emerge as Next Inflection Point for U.S. Equities.

• Beyond Friday's pivotal PCE release, markets now confront the imminent activation of Trump's 'reciprocal tariff' regime scheduled for April 2 - with under seven trading days remaining. The protectionist blueprint mandates country-specific tariff matrices, systematically calibrated to mirror exact U.S. import duty levels without exception, as per the former president's original doctrine.

• However, in a recent interview, U.S. Treasury Secretary Bessent unveiled the 'Dirty 15' framework, specifying that reciprocal tariffs would exclusively target nations exhibiting adversarial trade balances, manipulative currency practices, and restrictive regulatory regimes toward U.S. commerce. Ironically, Goldman Sachs' 2024 trade flow analysis identifies precisely 15 merchandise trade deficit partners for the U.S., with China, the EU bloc, and Mexico constituting 58% of the total imbalance. This reveals the 'Dirty 15' designation effectively captures all material deficit jurisdictions, constituting a de facto universal coverage mechanism - an economically rational approach given the futility of taxing surplus-generating trade counterparts.

• Furthermore, Secretary Bessent hinted at potential carve-outs for nations with pre-negotiated bilateral arrangements, a caveat Morgan Stanley analysts interpret as creating selective relief valves - particularly for Mexican energy exports, Canadian lumber flows, Indian pharmaceutical shipments, and specific EU machinery goods. However, China's advanced manufacturing exports and strategically sensitive EU tech components are conspicuously absent from any plausible exemption list. More critically, the April 2 implementation date likely constitutes merely the opening salvo, with Trump's tariff architecture permitting graduated escalation mechanisms that could see China-facing duties ratchet up to 60% over a 24-month horizon, per our proprietary scenario modeling.

• Over the past fortnight, diminished public posturing from Trump has coincided with relative market tranquility. However, this lull should not be conflated with tariff de-escalation. Regarding the imminent April 2 rollout of reciprocal tariffs, we anticipate the administration will first impose nation-specific tariff tiers targeting the Dirty 15 trade deficit jurisdictions, subsequently deploying coercive delay tactics blending threats and implementation postponements - essentially a scaled-up iteration of last month's China-Canada-Mexico pressure playbook.

• Refocusing on portfolio strategy, we reaffirm our persistent thesis: within the ongoing debt restructuring cycle, Trump's tariff resolve remains a non-negotiable element in risk premium calculations. While markets have stabilized marginally in the recent week, the tripartite uncertainties of inflation trajectories, tariff implementations, and corporate earnings guidance continue to distort forward-looking pricing mechanisms. Maintaining our risk-off positioning, we retain sub-10% tactical equity exposure in U.S. markets with asymmetric downside risks.

Disclaimer

1. The information contained in this document is for reference only and does not constitute any financial advice or a transaction offer, solicitation, suggestion, recommendation or any guarantee for any financial product, strategy or service. You should make your own investment decisions and bear the risk of investment responsibility independently.

2. The content of this document is based on reliable data sources that the staff believed to be reliable at the time of production. The Tiger Investment Research team may adjust without prior notice. The Tiger Investment Research team does not guarantee the accuracy, reliability or completeness of the content of this document, and does not assume any responsibility for any transactions arising from the content of this article and its derivative consequences.

3. This document is confidential and non-public and can only be accessed by professionals with corresponding risk-taking capabilities and preferences. Without the prior consent of Tiger, no one may copy or distribute it in any form.