Ping An Securities: Economic "stagflation" expectations are warming up, coupled with downward revisions in performance expectations. There is still pressure for further correction in the US stock market.

Ping An Securities released a research report stating that, in the current context, all USD assets may face headwinds, and one should be cautious of the risk of price fluctuations. As for the US stock market, with the expectation of economic "stagflation" heating up and the downward revision of 2025 performance expectations, and with the background of convergence space still available for US technology stock valuations, it is expected that there will be further pressure for the US stock market to decline. The key to the US stock market rising again may lie in the process of slowing down the balance sheet and interest rate cuts. However, due to the difficulty in implementing the balance sheet slowdown and interest rate cuts in the short term, it is expected that there will be a lack of significant positive news in the short term. In terms of US bonds, under the expectation of "stagflation", US bond interest rates still have room to decline, leading to a flattening yield curve. As for the US dollar, the fundamentals of the United States are weakening, combined with the weakening of the interest rate differential advantage between the US and non-US, the US dollar may still have room for depreciation. Since late February, USD assets have shown a trend of declining US stocks, rising US bonds, and a weakening US dollar index, mainly affected by the impact of Deepseek on the US AI technology bubble, disruptions caused by Trump's policies, and weakening economic data. The Deepseek impact on the narrative dominance of AI companies in the US stock market, the squeeze on tech stock valuations, and doubts about the "US stock exception theory". Trump's complex and constantly escalating tariff policy has increased market risk aversion sentiment, and the rapid implementation of contractionary policies such as spending cuts and layoffs and tightened immigration policies has raised concerns about employment in the market. Some macroeconomic data are indicating a further slowdown, exacerbating market concerns about the US economic outlook. Overall, despite the lack of clear signs of recession in current US economic data, with the gradual effects of Trump's economic policies becoming apparent, the risks of weakening US growth and upward inflation are increasing. The focus of the market may shift from "recession" to "stagflation". It is worth noting that, considering the underlying logic of Trump's tariff policy and the structural features of inflation, the actual room for US inflation to rise may be limited, while the risk of "stagflation" may be more concerning.