ETFs Keep Sucking Up Money, Markets Make Healthy Pullbacks, Cottage Season Dumbing Down - 0519 Weekly

At the beginning of the week, China and the U.S. recently held a high-level meeting in Switzerland and finally reached a tentative trade agreement, resolving to cut tariffs sharply, successfully easing the pressure of the trade war that has been heating up over the past few months, and injecting long-awaited confidence into the global supply chain and consumer market. According to the Associated Press, the U.S. tariffs on Chinese imports have been reduced from 1,45% to 10% to 30%, while the Chinese side has also lowered tariffs on U.S. goods from 1,25% to 10%. Although the agreement is only a temporary arrangement for a period of 90 days, it demonstrates a strategic compromise and a reduction of tariffs by the two sides in the face of the weakening of the global economy and inflationary pressures. Although the agreement is a temporary arrangement for only 90 days, it demonstrates the strategic compromise and cooling intention of both sides in the face of the global economic weakness and inflationary pressure.

Meanwhile, the latest inflation data from the U.S. has also injected momentum into risky assets. According to The Wall Street Journal, the annual increase in the Consumer Price Index (CPI) in April was only 2.3%, a record low since 2021, and lower than the market's original estimate of 2.5%. Overall, the data suggests that inflationary pressures in the U.S. are continuing to cool, thanks to the stabilization of energy and commodity prices, the decline in the cost of imports, and the positive effects brought about by the de-inventorying of businesses. Following the release of this report, the market once bet on the Federal Reserve to start cutting interest rates as soon as July, and risky assets benefited in the short term. Although Federal Reserve Chairman Powell later said that "more data is needed to support a sustained fall in inflation" in an attempt to cool market expectations, the US dollar and US bond yields still shifted lower in tandem, and the warming of risk appetite did not subside. In particular, the crypto market, where asset liquidity is highly correlated to interest rates, was generally encouraged and the upward trend of the currency was further confirmed.

While macro policies are easing, there is also an unexpected ray of hope on the geopolitical front. U.S. President Donald Trump has recently announced that he has successfully coordinated India and Pakistan to reach a ceasefire agreement, and the two sides have agreed to completely stop the exchange of fire on the Kashmir border from May 10, bringing a short-term peace opportunity to the long-standing turbulent situation in South Asia. According to Reuters, the previous military conflict between India and Pakistan has caused dozens of deaths and injuries, and the international community is highly concerned.

Overall, as of Thursday, a number of positive macro signals, ranging from US-China tariffs cooling down, US inflation easing to India-Pakistan situation easing, have not only reversed the nervousness and wait-and-see sentiment in the early stage of the market, but also contributed to the overall recovery of crypto assets this week. Risk appetite is expected to continue to rise in the short term, but we still need to watch the US-China tariff situation, whether CPI data will continue to fall, and whether geopolitical conflicts will heat up again before confirming whether crypto will enter the next medium-term uptrend cycle.