After a very strong month, the macro market is in rest mode, even with weak economic data and rising US yields, the SPX index rose nearly 3% in May. In the past few days, the US first quarter GDP has been significantly revised down (1.6% --> 1.3%), consumption has dropped sharply (2.5% --> 2%), core PCE has also been revised down (3.7% --> 3.6%), and Chinas economic data has also returned to the old track, with the manufacturing PMI in May falling sharply to below 50, significantly lower than market expectations (50.5), production, demand, new orders, exports and imports are generally weak, and the Hang Seng Index has quietly fallen 5% from its recent highs and is basically flat this month.
There is a lack of clear conviction on the macro front, and price action is driven primarily by month-end rebalancing. Commodities and stocks fell sharply yesterday, with U.S. stocks closing down about 1% on Thursday, and tech stocks such as Dell (-15%), Salesforce (-20%), and even Nvidia (-4%) seeing massive sell-offs. Affected by rebalancing funds, tech stocks have fallen nearly 9% compared to a 3% rise in the SPX, and technical indicators suggest that the stock market could weaken further in the short term.
In fixed income, the U.S. Treasury yield curve has steepened significantly over the past two weeks (from -48 to -38) as the market suddenly turns its attention to a possible second term for Trump as president. Although both candidates are likely to pursue loose monetary policy and fiscal expansion plans, bond traders are more concerned about bond supply and inflation under Trump.
Furthermore, despite Trump being indicted and facing possible jail time for falsifying business records, a recent ABC/Ipsos poll in the US showed that only 4% of his supporters would withdraw their support even if he was convicted, while 80% pledged to continue their support, which is consistent with a previous poll that showed 94% of voters who supported Trump in 2020 intend to vote for him again in November, showing that his support base is extremely loyal and that this election is destined to be controversial regardless of the final result. The Manhattan court is scheduled to hand down its verdict on July 11, and Trump may appeal any ruling. There is no set timetable for other trials before Election Day on November 5.
There isn’t a lot to watch in the crypto space, with ETH outperforming BTC by about 0.8% this week, ETH’s inflows steady but lackluster, and the ETH S-1 approval date still unknown, with the market “consensus” suggesting it’ll be in July at the earliest. Meanwhile, native users have begun to turn to large memecoins like Shiba/Dogecoin and Pepe, which have seen gains of 10-20% in the recent flat market conditions.
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