Tao Dong: Trump slammed Trump's transaction.

Trump's nemesis in trade is none other than Trump himself. Trump's aggressive actions on issues such as raising tariffs and cutting spending have made the market jittery, causing US stocks to continue to decline. The S&P 500 index has fallen back to the level it was at in late September last year when the Trump trade began. At the same time, a series of economic data falling short of expectations has led to the concept of a Trump recession becoming a market curse. Expectations for a Fed interest rate cut have increased, prompting the Fed Chairman and Treasury Secretary to step in and stabilize market sentiment. Amid expectations of an economic downturn, the US dollar exchange rate has once again fallen, with European currencies leading the way. The Fed's Beige Book describes the economy as "slightly growing," and Powell says there is no rush to lower interest rates. The Chinese government has set a growth target of around 5% for 2025, with a deficit rate of 4%. Mers intends to break through budget constraints, causing a sharp decline in the German bond market. OPEC+ has announced the termination of production cuts, causing oil prices to initially drop, but Russia and the US intervened on Friday, stabilizing Brent crude oil prices. Gold has returned to an uptrend. Trump's virtual currency plan fell short of market expectations, but the price of Bitcoin stabilized after a sharp decline. The GDPNow model of the Atlanta Fed estimates that the US economy is currently growing at around -2.4%. From consumer confidence, inflation expectations, graduate employment, credit card delinquencies, and other indicators, the economy is indeed facing challenges. The possibility of further growth decline in the first quarter (even slight negative growth) is quite high. Trump's tariff policy and government spending cuts have brought significant uncertainty to the economy, so in some sense, the market's concerns about a recession are justified. However, we must distinguish between economic contraction and economic recession, and between economic activity contraction and economic uncertainty. Despite weakening job prospects and wage growth, the overall fundamentals of the US economy do not seem weak. Except for the lowest income groups, the author believes that consumption is weakening, but still holding up; as long as overall consumption holds, the economy is more likely to see a soft landing (with the possibility of temporary negative growth in the first quarter), rather than the recession feared by the market. In a recent public statement, Fed Chairman Powell described the economy as "in good shape," despite high policy uncertainty. This basically reflects the basic judgment of monetary policy makers on the economy, and their conclusion is naturally that there is enough space and time to wait for the dust to settle on Trump's new policies. Expectations for a rate cut have been advanced in recent months, but in the author's view, the reason the Fed is waiting is mainly due to Trump's policies, so it may be difficult to compress the six-month observation period and two-month market communication period, and the rate cut speed may speed up slightly thereafter. Similarly, US Treasury Secretary Benson also made a statement. Addressing the continued decline in the stock market, he subtly conveyed two messages: 1) The President watches the stock market every day, and there is no Trump poison; 2) The economy is entering a "detox period," which is a necessary policy adjustment, and the government should not be expected to intervene in the stock market, as "good policies will eventually drive the market up." The first message is that Trump is not the stock market's enemy; the second message is that the pain period is unavoidable, so prepare for short-term pain. The most important part of Benson's statement is about the US dollar, as he emphasized that the strong dollar policy of the US has not changed. The US dollar index has fallen nearly four points in the past week, reflecting concerns about the US economy, the impact of Trump's trade reversal, and doubts about the new government's dollar policy. Trump himself has a history of promoting a weaker dollar, while the US Treasury has maintained a strong dollar policy for the past twenty years. This is Benson's first clear statement on his stance on the US dollar since taking office. A recent survey by Bank of America Merrill Lynch shows that when asked which asset class they are bullish on, 56% of fund managers are optimistic about the M7 stocks in the AI concept. This is undoubtedly the most crowded trade in the market, despite recent sharp adjustments, funds' almost religious devotion to it remains unchanged, with the optimism ratio similar to the past two months. The second most favored asset is the US dollar, with 17% of fund managers optimistic. This is quite high for a currency, although down ten percentage points from the previous month. The third most favored asset is virtual currency, with 13%. When asked how to hedge against the risks of a comprehensive trade war by Trump, 58% of respondents pointed to gold, 15% to the US dollar, 9% to thirty-year Treasury bonds, and 7% to energy and commodities. Seeing gold as a safe haven tool is understandable, but the choices of the other asset classes are more scattered, and fund managers may lack confidence. The impact of Trump's new policies is comprehensive, explosive, and unpredictable, and recently, Trump has been beating up on the Trump trade himself, which is ironic. 4% of fund managers are bullish on Chinese technology companies, which is progress compared to 0% two months ago, but still much lower than their optimism for American tech companies, with a greater disparity in valuations. The emergence of DeepSeek has kicked off a new round of innovation centered around AI revolution in China. Not only DeepSeek, but a series of breakthroughs have recently appeared in fields such as artificial intelligence, semiconductors, and Siasun Robot & Automation. An important feature of this new innovation cycle is that the Chinese AI industry chain has finally formed a closed-loop ecosystem. Large language models, computing chips, cloud platforms, application scenarios, and data accumulation have each created a virtuous ecosystem, investment chain, and industrial chain in their respective fields, with joint efforts in policy, technology, and demand, supporting each other. The five major components of this industry chain all have strong international competitiveness and can operate independently without overseas support. The author believes that a new era of technological innovation has already taken shape. The focus of this week's data has two points: 1) US core CPI in February, expected to be 3.3%. 2) The Michigan Consumer Sentiment Index is estimated to continue to decline. Also, attention is being paid to China's two sessions and the new policies of Canada's new prime minister. This article was reprinted from the WeChat public account "Chief Economist Forum." The author is Tao Dong, President and Chief Economist of Freshwater Springs (Hong Kong) and a member of the Chinese Chief Economist Forum; GMTEight Editor: Wen Wen.