SignalPlus Macro Analysis (20240326): Macroeconomic situation is unclear and risk sentiment remains high
Due to the shortened holidays this week, market trading activities have slowed down, with trading volume being about 70-80% of normal levels. Much of the recent focus has been on foreign exchange markets, particularly the yuan and yen, both of which have begun to weaken following recent meetings of the Peoples Bank of China and the Bank of Japan.
Volatility has increased in both currencies, with CNY/CNH moving particularly sharply as traders prepare for the possibility of more easing from China, with the market paying particular attention to levels around 7.30, which is in line with The highs seen in the past 6 months are consistent.
In the U.S. market, Atlanta Feds Bostic reiterated his hawkish stance, saying he expects to cut interest rates only once this year and that the Fed can wait patiently as long as the economy remains stable. Director Wallers speech on Wednesday may be the highlight of this week, because Powells speech on Friday will take place when the US market is closed. As a quick refresher, Waller has said since February that there is no rush on the timing of a rate cut, and further reiteration of this view will raise questions about whether Powell is starting to lose consensus for his dovish claims.
On the stock market, the recent rally has brought the SPX Index to the year-end target price predicted by many Wall Street, causing strategists to scramble to update forecasts. With EPS revised upward, forward P/E multiples have also expanded. Next, unless Risk sentiment is likely to remain elevated if CPI really, really beats expectations, or the economy suddenly collapses, or the Fed takes a hawkish turn in the coming months.
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