Turning point, on March 13th!

Over the past month, the market style has changed dramatically, with both US stocks and US bonds falling, Bitcoin and gold surging and then falling back, and Chinese stocks experiencing a strong rebound against the trend.

According to the latest analysis by Michael Hartnett, Chief Investment Officer of Bank of America, the turning point for all of this may have occurred on March 13th, the day Bitcoin surged to a historical high of $73,157 before falling back. It was also on this day that market expectations for interest rate cuts shifted from being "more dovish than the Fed" to "more hawkish than the Fed".

After the recent Federal Open Market Committee (FOMC) meeting last week, the market expected the Fed to cut interest rates by 40 basis points this year, a significant decrease from the initial expectation of 2% at the beginning of the year.

Market Turning Point

On March 13th, not only was it a turning point for Bitcoin, but other assets also experienced significant changes.

The Merrill Lynch Option Volatility Estimate (MOVE) index surged to over 100, the Mexican peso, Japanese yen, and cocoa futures experienced flash crashes, and corporate bond prices plummeted.

At the same time, Chinese assets saw a significant turnaround. Since the low point in January, the Hang Seng Index has risen by nearly 21%, the Hang Seng Tech Index has risen by over 28%, and major Hong Kong stock indices have successively entered a bull market.

The latest weekly fund flow data from Bank of America shows significant outflows from gold and Bitcoin. Gold saw outflows of $1.1 billion, the largest since January 2024, while Bitcoin saw outflows of $600 million, the largest since June 2022.

Chinese stock funds saw the largest inflows in 8 weeks.

Hartnett stated that the market is pricing in higher interest rates to persist for a longer period.

Regarding future trends, Hartnett conducted a comprehensive assessment of the current financial markets and pointed out several key trends:

The bond market is in the early stages of a long-term bear market, driven primarily by inflation, with deeper reasons including excessive fiscal stimulus, debt accumulation, wars, and deglobalization. Hartnett believes that this bear market will only end when the US reduces fiscal excess;

The commodity market is entering the early stages of a long-term bull market for similar reasons as the bond market, and is benefiting from new energy demand driven by AI technology;

The stock market is currently in the late stage of a long-term bull market, which will ultimately end in a bubble or economic recessionThe US dollar is currently in a long-term bear market, especially compared to cryptocurrencies and gold. This trend is somewhat expected, as the rising US debt and deficit situation necessitate a weaker foreign exchange value to attract foreign capital, or to support government bonds through interest rate cuts.

In addition, Hartnett points out clear signs of stagflation in US spring data:

ISM new orders and employment indices are both below 50, while the price index exceeds 60.

At the same time, the ratio of job vacancies to unemployed persons in the US has been at its lowest since August 2021, indicating an increase in labor costs