Hello, Tigers!
Last night, U.S. stocks staged a sharp "V-shaped" rebound. In the afternoon, all three major indices rallied:
Nasdaq 100: +1.36%
S&P 500: +1.12%
Equal-weighted S&P 500: +1.01%
Russell 2000 (small caps): +1.02%
Dow Jones: +1.14%
Many investors might be wondering: Has the U.S. stock market reached a short-term bottom? I'll answer that question at the end of this article. First, let's analyze the recent key events.
I. What’s Behind the U.S. Stock Market Rebound?
1. Tariff Easing
On March 5, the White House announced that Trump had agreed to delay the implementation of new auto tariffs on certain vehicles from Mexico and Canada by one month. This decision came after discussions with executives from GM, Ford, and Stellantis.
According to Reuters, automakers had requested an exemption from the newly imposed 25% tariff on Mexican and Canadian vehicles, arguing that these should qualify for duty-free treatment under the 2020 U.S.-Mexico-Canada Agreement (USMCA).
As a result, U.S. auto stocks surged last night:
GM: +7%
Ford: +6%
2. Rate Cut Expectations Rise
The ADP private payroll report, often seen as a preview of official jobs data, showed a sharp slowdown in hiring. February’s ADP employment numbers unexpectedly dropped to 77,000, missing the 140,000 forecast and marking the slowest job growth since July 2024.
Weaker labor market data increased expectations for Federal Reserve rate cuts. Markets are now pricing in over 70 basis points of rate cuts by year-end, putting pressure on the U.S. dollar while boosting U.S. stocks.
3. Sentiment Hits Extreme Fear, Valuations Look Reasonable
CNN’s Fear & Greed Index has dipped into "Extreme Fear" territory. Intraday panic levels dropped to 19, before rebounding slightly to 22 by market close.
The S&P 500’s short-term moving averages remain in a low zone.
The index’s forward P/E ratio is 21, placing it in the 54th percentile over the past 5 years and 76.8th percentile over the past 10 years, well below historical peaks.
The Nasdaq 100’s forward P/E is 25.9, within a reasonable historical range.
The "Magnificent Seven" (MAGS) stocks are all below their 50-day moving averages, and key names like Google, Microsoft, NVIDIA, Tesla, and TSMC have fallen below their 200-day moving averages, making valuations more attractive.
4. Crypto Speculation Heats Up
Trump has recently made waves in the crypto community:
Last weekend, he announced plans to establish a “National Crypto Reserve”.
This Friday, he is set to attend a White House cryptocurrency summit.
While these developments have fueled excitement in the crypto space, the details remain unclear. If Bitcoin can reclaim the $100,000 level, it could boost risk appetite across the broader stock market, particularly benefiting tech-related assets.
II. This Week’s Investment Strategy
1. Assessing the Short-Term Bottom
To determine whether the market has bottomed, we need to weigh negative catalysts (tariffs, inflation, political risks, Middle East tensions) against positive factors (rate cut expectations, improving sentiment, reasonable valuations).
For U.S. stocks: The market seems to have priced in most negative factors, and bullish sentiment is starting to build. With crypto catalysts coming up, investors with a higher risk tolerance might consider starting to accumulate positions.
For Hong Kong stocks: Short-term caution is warranted. The Hang Seng Tech Index has already surged 40% since January, and it may have priced in most bullish factors.
One key event to watch is China’s meetings, particularly the March 6 economic policy press conference. Key officials—including the heads of China’s central bank, finance ministry, and securities regulator—will outline their economic policies. If market expectations are not met, Hong Kong stocks could face downside risks, making hedging strategies necessary.
Stay tuned, and trade wisely! 🚀
Comments