Market turmoil intensifies, multiple risks suppress economic outlook

This week, the financial markets experienced severe fluctuations, highlighting a three-pronged attack on stocks, bonds, and currencies. Although the S&P 500 index rose 5% during the week, the volatility was immense. The yield on the 10-year U.S. Treasury surged to a high of 4.47%, while the U.S. dollar index fell below the 100 mark. Meanwhile, gold prices broke through $3200 per ounce, reaching a new high.

In terms of economic data, the CPI unexpectedly declined, but core inflation remains stubborn. The PPI fell by 0.4% month-on-month, indicating a coexistence of shrinking demand and rigid costs. It is worth noting that the current data does not yet reflect the impact of the new tariffs, and the market is reacting more pessimistically to this.

There have been some warning signs regarding liquidity. Long-term government bond prices have fallen sharply, triggering a decline in the value of government bonds used as collateral, forcing hedge funds to sell off government bonds to meet margin calls, creating a "down-sell-further down" spiral. Pressure in the repurchase market is increasing, and the spread between BGCR and SOFR is widening, reflecting a sharp rise in the cost of financing collateral.

In terms of external risks, although there are signs of easing in the Sino-U.S. trade friction, long-term risks still exist. In 2025, the United States will face refinancing pressure as nearly $9 trillion in U.S. debt matures, and if foreign holders sell off on a large scale, it will exacerbate liquidity pressures.

Looking ahead to next week, the market may shift towards a defensive logic. Funds may continue to flow into non-US safe-haven assets such as gold, yen, and Swiss franc. Stagflation trades may dominate the market, with long-term U.S. Treasuries and high-leverage equity assets facing selling risks.

Key indicators to focus on include whether the 10-year U.S. Treasury yield breaks above 5%, changes in China's bond holdings, the Bank of Japan's currency intervention measures, and the trends in high-yield bond spreads. Overall, the market is shifting from "inflation concerns" to a dual impact of "U.S. dollar credit crisis + stagflation," with the traditional negative correlation between stocks and bonds gradually losing effectiveness, requiring investors to remain vigilant.