Review of Macroeconomic Market Hot Topics

Recent Macroeconomic Background Favorable

Inflation is cooling down across the board, with the U.S. June CPI showing a month-on-month decline for the first time in four years, and the core year-on-year growth rate hitting a new low in over three years. The job market has softened slightly, but overall it remains balanced and stable. The economic surprise index is at a low point, and financial conditions remain loose. These factors are favorable for the risk asset market, as investors anticipate the Federal Reserve will take action to support economic expansion.

As the dollar weakens and the Federal Reserve begins to cut interest rates, emerging markets and cryptocurrencies may benefit, especially in the context of no recession occurring. If expectations shift from a soft landing to a hard landing, there may be a need to quickly move from equity risk assets to bonds.

Q2 earnings season faces pressure

The current market focus is on the earnings season that has begun. Wall Street expects Q2 earnings for the S&P 500 to grow by 8.9% year-on-year, significantly higher than the previous quarter. However, it may be challenging to achieve the same level of surprises as before, so there could be profit-taking or sector rotation during this earnings announcement season.

Discussions questioning the profitability of AI are becoming increasingly prevalent in the market. As major tech stocks emerge from the performance lows of 2022, the likelihood of other companies maintaining strength after earnings reports diminishes, except for a few hardware-focused firms. A better outcome may involve shifting from large tech stocks to other sectors, or a shift in focus from AI to other emerging fields such as humanoid robots and autonomous driving.

Boeing Company Pleads Guilty

Boeing has agreed to plead guilty in two criminal cases related to the 737 Max, facing fines of up to $487.2 million. This represents the end of Boeing's negative news, which could be a good thing for the recovery of its valuation. This situation is somewhat similar to the guilty plea fines of a certain trading platform in November 2023, after which its token price rose significantly.

Market Bets on Republican Election Victory

The derivatives market is now very pessimistic about the current president, with the prediction market probability of Trump winning the election jumping from 40%-50% at the beginning of the year to about 60%. The probability of a complete Republican victory has also increased, currently around 50%.

Institutional investors' focus is shifting from growth and monetary policy to politics. The emphasis is on changes in the likelihood of Trump's ascension to power, with investors questioning potential tariffs, tax policies, and regulatory changes that may be implemented.

The Republican Party's significant victory may lead to an extension of tax reduction policies and increased fiscal spending, which could be a direct positive for stocks.

The Impact of China's Economy on Global Inflation

China is in a state of deflation and is exporting deflation. This puts downward pressure on core inflation rates in Europe and the United States, potentially providing more room for interest rate cuts by central banks in these regions this year, benefiting the stock and cryptocurrency markets.

China holds a significant market share in several key export products, including high-tech sectors. However, China's investment-driven economic growth model has also led to the problem of overcapacity.

Bitcoin's performance lags behind

Since the beginning of the year, Bitcoin's risk-return ratio has been significantly lower than that of the U.S. stock market, a situation that is rare in history. The main reason is the unexpected sharp decline in the past month.

Progress in the RWA Field

BlackRock's BUIDL has launched for less than four months and currently holds tokenized government bonds worth $502.8 million. MakerDAO plans to invest $1 billion from its reserves into tokenized U.S. government bond products. This means a 55% growth in the scale of existing U.S. Treasury RWA tokens, which could bring significant additional income.