SignalPlus Macro Analysis Special Edition: Going from bad to worse, plummeting

The situation has changed dramatically in just a few days.

After listening to numerous central bank and Federal Reserve officials discuss the timing of interest rate cuts, coupled with escalating geopolitical risks, the risk markets were hit by a sudden chill.

The SPX fell 1.5% (with 92% of its components declining, and every sector in the red), while U.S. Treasuries and the dollar saw a surge in safe-haven buying. Cryptocurrencies suffered losses exceeding 10%, with BTC plunging from $69,000 last Friday to $59,000 yesterday before recovering about half of the decline.

Following a series of unfavorable inflation data, last Friday's economic figures remained grim. China's trade data fell significantly below expectations (exports at -7.5% vs. the expected -1.9%, imports at -1.9% vs. the expected +1.0%), while the University of Michigan Consumer Sentiment Survey (with current and expected indices missing forecasts and inflation expectations unexpectedly rising) showed signs of "stagflation."

The technical trends of major indices have clearly turned negative. The China CSI 300 Index failed to break above its 200-day moving average, while the SPX is on the verge of falling below its 200-day moving average for the first time since Q4.

According to JPMorgan's data, traditional investors' cash allocations have now returned to decade lows, a time when deposit interest rates were still near 0%. Two and a half consecutive quarters of gains have prompted investors to go all-in, even "all-in" on high-beta investments, leaving the market with little buffer to absorb further stock sell-offs.

That said, JPMorgan's research suggests that, assuming the economy avoids a recession, the current trajectory of the SPX closely resembles previous post-rate-hike cycles. Of course, the key assumption is that the economy does not slip into a recession—and fortunately, current economic conditions still appear to support this.

Returning to geopolitics, the situation remains highly volatile. Notably, while U.S. Treasury yields and stock prices rose over the past few trading sessions, spot gold also climbed—a rare occurrence. It's as if gold had advance knowledge of escalating tensions, becoming a safe-haven buy while other asset classes were caught off guard.

Speaking of safe-haven shifts, BTC (disappointingly) failed to uphold its "digital gold" narrative. As BTC prices plummeted over 10% in minutes, more than $1 billion in leveraged long futures positions were ruthlessly liquidated, and on-chain DEXs saw their largest long liquidation in over a year.

Although prices eventually rebounded (due to signs of U.S. efforts to de-escalate tensions), the damage to crypto's technical outlook was already done. Charts show a bearish breakout, with altcoins suffering even more—the top 20 coins saw weekly losses of 20-30%, while ETF inflows began to slow.

As an old trading adage goes, events themselves rarely cause sharp price movements directly, but they do reveal the current positioning and risk buffers of market participants. Let's see how we recover from this setback. As we've repeatedly emphasized, risk management is always key—and those who endure usually emerge as winners.