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We experienced severe aftershocks in Bangkok from an earthquake whose epicentre was in Myanmar. It served as an unnerving reminder of Mother Nature’s raw power—something you’ll never forget when the ground shifts beneath you. However, far more tragic is the news that a new office tower under construction just 15 km from me collapsed during the quake, reportedly trapping over 50 workers who remain unaccounted for. My thoughts and prayers are with those families during this devastating time.

US MARKETS

Wall Street took a brutal gut punch on Friday, with U.S. stocks unravelling as President Trump’s trade war escalated and sticky inflation threw another wrench into the Fed’s policy plans. The Dow tumbled over 700 points, shedding nearly 1.7%, the S&P 500 dropped close to 2%, and the Nasdaq led the retreat, down 2.7%, dragged lower by tech heavyweights. Traders weren’t just reacting—they were bailing.

The trigger? A red-hot PCE inflation print that landed like a hammer. The Fed’s preferred inflation gauge—the core Personal Consumption Expenditures index—came in above expectations, rising 0.4% on the month and 2.8% year over year. Translation? Rate cuts in 2025 just got pushed further to the back burner, with even one now in serious doubt.

Let’s be honest—this month’s been a trainwreck for equity investors. The market has been whipsawed between the ugly jaws of stagflation: inflation refusing to roll over, even as growth sentiment nosedives. Consumer sentiment is cratering, and anyone who’s been around the macro block knows that soft survey data has a nasty habit of leaking into the hard data. That’s the real fear now—spending pullbacks snowballing into earnings downgrades and investment stagnation.

Indeed, stagflation risks are mounting as protectionist trade policy slams headfirst into a U.S. consumer base that's getting cold feet about their wallets and the broader economic outlook. The collision course is set—and confidence is cracking.

Next week? Buckle up. Trump's long-telegraphed reciprocal tariffs are set to drop, and that’s just the first volley. Also on deck: updates on the Phase One trade agreement with Beijing, along with macro prints from all corners of the globe. But markets aren’t just reacting to headlines—they’re now bracing for second-order impacts. If consumers pull back further—and stay there—this could move from noise to a full-blown signal in the data.

The prevailing view: trade wars sap growth and juice inflation. The open question is just how much—and for how long. But with inflation still running hot, Wall Street isn’t in the mood to wait around for clarity. Technicals are turning against the bulls too, with the S&P slicing cleanly through its 200-day moving average, triggering a bearish feeding frenzy.

As the great Paul Tudor Jones once said: “Nothing good happens below the 200-day moving average.”

Right now? Traders are taking that to heart.

Chair Jerome Powell has tried to soothe nerves, sticking to the script that inflation will prove "transitory." But those words are fading fast as the tariff machinery cranks into overdrive and more Fed officials step forward with a mix of concern and confusion. One policymaker even summed it up bluntly: “zero visibility in a dense fog.”

That fog isn’t just metaphorical—it’s become a real constraint on forward guidance, leaving both rate expectations and the Treasury curve caught in a standoff. And with Powell’s credibility taking on a few dents, the bond market is left trying to price a macro environment that’s being rewritten on the fly.

In short, the compass is spinning, visibility is nil, and nobody’s quite sure what’s on the other side of this tariff storm. So get out as the bugle retreat sounds across global markets when in doubt.

FOREX MARKETS

The sticky inflation narrative hasn't exactly been the tailwind dollar bulls were hoping for. In fact, the greenback’s muted reaction—despite a hotter-than-expected core PCE print—might be flashing early warning signs. It’s early days, yes, but there’s a creeping sense that confidence in the dollar is starting to erode beneath the surface.

The dollar has been living large off two pillars since 2021: a relatively hawkish Fed and the ever-glowing halo of U.S. economic exceptionalism. But fast forward to now, and those twin engines are sputtering. The Fed’s policy edge is fading into ambiguity, and the "U.S. exceptionalism" narrative is unravelling—thanks in no small part to what many in the market see as a chaotic, incoherent policy playbook out of the White House.

That’s showing up loud and clear in U.S. equity price action, where downside hedges are no longer just insurance—they’re the dominant expression. It’s a regime shift, and the market smells it.

Now, gold’s vertical launch to fresh highs has everyone asking: Why is it really rallying this hard?

Sure, the de-dollarization narrative has been in the background for a while now, but traders are starting to peel back another layer of the onion: are FX reserve managers, who sit on nearly $13 trillion in global reserves, quietly reducing their dollar allocations? We won’t know officially until Monday when the IMF drops its reserve composition data through December, but gold’s relentless bid—particularly the physical flow into COMEX—suggests the rotation might already be underway. ( Dollar and Treasuries Out, Gold In)

There’s no denying the physical demand—central banks, Asia, and ETF flows are all leaning hard into the yellow metal. But what’s more telling is how meekly the dollar reacted to the White House’s 25% auto tariff hammer. That move should have been a slam dunk for the greenback: hurting foreign exporters more than domestic players, tightening inflation expectations, and amplifying U.S. yield advantage.

But the FX market shrugged. Instead, the dollar sagged—particularly against the euro, which looks poised to close above the 1.0830 pivot. Traders are no longer just chasing the dollar for yield—they’re questioning its role as the macro hedge of choice.

And let’s not forget the feedback loop here: a weaker dollar only turbocharges the bullish gold thesis. If this is indeed a structural reallocation out of the dollar and into hard assets, we may just be at the beginning of a longer-term regime shift.

Bottom line: the soft bid under EUR/USD this week may have been the canary. And gold’s surge? It might not just be a hedge—it could be a vote of no confidence for the greenback.

MARKET STRUCTURE

We’re heading into month-end, and if you’re wondering why market moves feel more exaggerated than usual—well, I did say this was coming.

The structural picture is shifting fast, and nowhere is that more evident than in the S&P 500 futures pit. Liquidity, as measured by depth in the book and average top-of-book volume, has cratered to two-year lows. Deutsche Bank's tracking and Citi’s liquidity index are both flashing warning signs. That means even vanilla-sized orders are leaving disproportionately large footprints on the tape—hello, amplified moves and outsized reactions.

This isn’t just about algorithms playing ping-pong in a shallow pool—it’s about risk managers pulling back exposure, quarter-end rebalancing flows adding to tape distortion, and futures markets reacting more violently to relatively benign inputs. The cost of hedging is ticking higher as bid-ask spreads widen, and high-frequency market makers aren’t stepping in with their usual aggression. When they pull back, the market microstructure starts to feel more like a minefield.

So when you see equity price action get whipped around on light volume and macro narratives that don’t fully justify the magnitude—know this: it’s not just sentiment, it’s plumbing.

Tread carefully. And don’t say I didn’t warn you.

CHART OF THE WEEK

The S&P 500 may rise less than expected as GDP growth slows

With U.S. GDP growth cooling and trade-policy uncertainty ratcheting higher, Goldman Sachs Research has trimmed its year-end S&P 500 target from 6,500 to 6,200. That still implies about a 10 % upside from current levels (as of March 28), but the revision underscores a broader shift in tone. Hedge funds and institutional players have already been in de-risk mode, unwinding positions and adding to market churn.

“The spike in uncertainty typically causes short-lived valuation headwinds,” said David Kostin, Chief U.S. Equity Strategist at Goldman Sachs Research. “But when you combine that with a slower macro trajectory, it’s a recipe for more sustained compression.”

For context, a 10% drawdown in the S&P 500 is par for the course in any given year—the current drop simply puts us right in line with that historical average. But with macro headwinds intensifying and positioning thinning out, investors may want to buckle up for more chop before any year-end rally takes shape.

“Outside of recessions, 10% pullbacks in the S&P 500 have historically been more buying opportunity than omen,” notes Goldman Sachs' David Kostin. And the data backs him up: over the past 40 years, scooping up the S&P 500 after a 10% dip has delivered positive six-month returns 76% of the time—hardly a gambler’s coin toss.

With Goldman forecasting a 1.7% GDP growth clip for the U.S. in 2025, this playbook may still hold. But volatility isn’t just a buzzword—it’s the price of admission in this market. That’s why Kostin's team is urging investors to get surgical: screen for names with low beta to the current minefield of macro themes—be it slowing growth, tariff crossfire, or the AI boom-to-bubble risk.

Bottom line: unless you’re calling for a recession, the drawdown might just be your entry signal. Just don’t go in blind—know your exposures and hedge the noise.

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