Yielding to the bond market.
"Sometimes decades go by without anything happening, while sometimes decades' worth of events happen in just a few weeks."
Lenin's famous saying perfectly matches the wild fluctuations of the Global financial markets over the past week.
Overnight, Trump stated, "Imposing a 90-day tariff suspension on countries that do not retaliate," leading to a historic rebound in the US stock market.
The Dow soared nearly 3,000 points to a record high, the S&P 500 Index rose 9.52%, marking the largest increase since 2008, and the Nasdaq surged over 12%, with the Market Cap of the "Magnificent 7" skyrocketing to a record $1.85 trillion in a single day.
What is even more intriguing is that before Trump announced the tariff suspension, just as the US stock market opened, at 9:33 AM Eastern Time, Trump Posted on his self-created social media platform, Truth Social:
The USA will be stronger and more powerful than ever before!
Four minutes later, he added: "Now is a great time to Buy!!! DJT"
"DJT" is not only the initials of Trump's name but also the stock code for Trump Media & Technology Group.
At 1:19 PM Eastern Time, Trump posted on Social Media that tariffs would be paused for 90 days, and reciprocal tariffs would be reduced to 10%. The US stocks immediately staged an epic rebound!
At 9:37, when Trump called to "Buy," the stock price of DJT was $16.69. After the announcement of the tariff suspension at 1:19 PM, it began to soar starting at 1:20, closing up over 21%, with a stock price of $20.27, marking the largest single-day increase of the year.
Regarding Trump's actions, American retail investors expressed doubts, believing that this is equivalent to market manipulation.
The 'Bond King' Gross has posed a soul-searching question to US stock investors:
In such a vast market like the US stock market, the price movements can actually fluctuate tremendously based on the emotions and decisions of just one person, the president. Is it really wise to Buy US stocks?
Perhaps Trump's abrupt 180-degree shift in attitude is closely related to the bond market.
Since yesterday afternoon, everyone must have come across a lot of news about the bond market's crisis.
The 10-year US Treasury yield surged nearly 40 basis points in just two days, reaching 4.5% on Wednesday at one point, while the 30-year US Treasury yield briefly surpassed 5%.
On the same day, some investors expressed that if there is no urgent interest rate cut and the announcement of a large-scale quantitative easing plan tomorrow morning, the US could face a stock market crash reminiscent of 1987.
Regardless of the true reason behind the strange surge in USA Treasury yields, one thing is very clear: the liquidity in the Bonds market must not have any issues.
This is the last stronghold that the USA Treasury and the Federal Reserve will fiercely defend. Just as in October 2023, when the 10-year USA Treasury yield reached 5%, the Federal Reserve immediately issued a dovish statement and paused interest rate hikes.
When asked why he decided to pause tariffs, Trump admitted the impact brought by the Bonds market.
The "Bonds market is very tricky, I have been observing it. But if you look at it now, it’s beautiful. I saw people a little uneasy last night. You have to have flexibility to do things right," he said.
If we talk about the biggest takeaway from the global tariff farce in the past week, at least two points are clear:
The first point is that Trump's focus in 2.0 has genuinely shifted from the stock market to the Bonds market, further clarifying that it is the yield of Bonds that needs to decrease.
The article "A Historic Massive Decline!" mentions that the USA federal debt is 36 trillion USD, the federal budget deficit is about 1 trillion USD, and the interest expenditure on national debt is also 1 trillion USD.
A deficit of 1 trillion, and the interest is also 1 trillion. In simple terms, if money cannot be borrowed, it cannot be repaid, and this is one of the key reasons why the market is abuzz with the importance of the "Mar-a-Lago agreement" on zero-interest hundred-year bonds.
Of course, it's hard to imagine a default now, but the biggest taboo in investment is the inertia of rigid bubble thinking; it's essential to be aware that such risks exist.
So, the most important thing for Trump right now is to raise funds, not to rebuild the manufacturing industry (an important means of gaining votes). He has proposed unprecedented "reciprocal tariffs," but waits for calls he wants in vain, and the Federal Reserve is not cooperating with interest rate cuts, nearly causing a collapse in the bond market, so he can only try again another day.
The second most important insight is that the importance of domestic demand is beyond doubt, and it cannot be changed by anyone's will.
Today, among the 31 first-tier industries of Shenwan, the sector with the highest increase is the commercial retail sector, which rose by 4.83%.
The Consumer theme ETFs also performed well, with the Ping An Online Consumer ETF, Invesco Great Wall Hang Seng Consumer ETF, Huaxia Hong Kong Stock Consumer ETF, and Hang Seng Consumer ETF Hua Tai Bai Rui leading the gains.
Which Industry recovered the fastest from the epic decline on April 7?
Comparing the performance of the Shenwan一级行业 on April 7 and from April 8 to April 10, the Agriculture, Forestry, Animal Husbandry, and Fishery sector performed the best as a tax-advantaged sector, while the Trade and Retail sector completely recovered the losses from April 7, and the Military Industry sector also regained over 90%.
Currently, there are 9 ETFs containing Consumer in their names that successfully recovered the losses from April 7, tracking the indices of 800 Consumer, CSI Consumer 50, SSE Cons Staples Index, and leading Consumer companies.
The largest by scale is Huatai PCA Consumer ETF, with the latest scale being 16.002 billion yuan. The one with the lowest fee cost is ICBC Credit Suisse Leading Consumer ETF, with a management fee + custodian fee of "0.5% + 0.07%".
The evolution of ETFs has been mentioned in many articles: it is important to constantly observe in the low-interest-rate era, what will be the next carrier of wealth when the real estate market no longer serves as a reservoir of residents' wealth? The bond market? The stock market? REITs?
For the first time in history, policies have put the stability of the real estate market and the stock market together, as mentioned in the "Special Action Plan to Boost Consumption" released in March, which clearly mentions the stock market and takes "multiple measures to stabilize the stock market" as the core approach to widen residents' property income and boost consumer ability, with various national departments, national teams, insurance funds, public offerings, and banks completing the full chain of stabilization in just 48 hours...
Various signs indicate that this time may be different.
In any case, the global economic order is indeed different now, as Dalio said:
"Do not think that what is happening now is mostly about tariffs. We are witnessing a typical major restructuring of monetary, political, and geopolitical orders."
With many words, do not know what to say. Here is a share of Midea's 2024 shareholder letter, facing the entrepreneurs at the front line of turmoil:
"No matter how the macro environment changes or how turbulent the geopolitical situation is, there is no road longer than two legs, no wall higher than hope in the heart, and no distant place that cannot be reached."
