Macro Weekly Report: Trend Slowing, but Remain Optimistic About Market Outlook for the Year

Market Overview

Since the third quarter, well-performing assets include the Russell 2000 Index, gold prices, financial stocks, and U.S. Treasuries, while poorly performing assets include Ethereum, crude oil, and the U.S. dollar. Bitcoin and the Nasdaq 100 Index are basically flat.

The current US stock market is still in a bull market, with the main trend going upward. However, the last few months of the year may lack performance themes, and the market's upward and downward space may be limited. The market continues to lower its earnings expectations for the third quarter.

Recently, after a valuation correction, the rebound has been quite rapid, with a price-to-earnings ratio of 21 times still far above the 5-year average. 93% of companies in the S&P 500 index have reported their earnings, with 79% of them exceeding earnings expectations and 60% exceeding revenue expectations.

Currently, corporate buybacks are the strongest technical support in the US stock market, with approximately $5 billion a day and an annualized $1 trillion. Although large tech stocks have shown some weakening in performance, their long-term growth potential remains.

Federal Reserve Chairman Powell made the clearest statement yet on interest rate cuts at the Jackson Hole meeting, confirming that a rate cut in September is a foregone conclusion. However, he still emphasized that the pace of policy easing will depend on future data.

Capital Flow

Chinese stock funds have seen net inflows for 12 consecutive weeks, with a net inflow of 4.9 billion USD this week, setting a new five-week high. However, from the perspective of Goldman Sachs clients, there has been a continuous reduction in holdings of A-shares since February, with recent increases mainly in H-shares and Chinese concept stocks.

The global money market fund saw inflows for four consecutive weeks, with a total scale rising to a new high of $6.24 trillion, indicating that market liquidity remains abundant.

The U.S. government debt may reach 130% of GDP within 10 years, and interest expenses will account for 2.4% of GDP, which is clearly unsustainable.

US Dollar Weakness

The US dollar index fell by 3.5% in the past month, the fastest pace since the end of 2022, related to the market's increased expectations for the Federal Reserve to cut interest rates. If the dollar drops too much, it may suppress the stock market.

Two Major Themes Next Week: Inflation and Nvidia

Important data includes the US PCE inflation rate, European CPI, and Tokyo CPI. Nvidia's earnings report will be released after the US stock market closes on Wednesday, attracting significant attention.

NVIDIA Earnings Report Preview

NVIDIA's performance has become a barometer for AI, tech stocks, and even the overall market sentiment. Analysts generally maintain an optimistic outlook for this earnings report.

Market revenue expected to be $28.6 billion, a year-on-year increase of 110%; EPS $0.63, a year-on-year increase of 133.3%; data center revenue $24.5 billion, a year-on-year increase of 137%.

Key areas of focus include: whether the Blackwell architecture is delayed, demand for existing products, the degree of slowdown in performance growth, the situation in the Chinese market, changes in the product line, etc.

Although AI storytelling faces some challenges, as long as it is not disproven, the negative impact on Nvidia's performance is more about emotional fluctuations. In the long run, the demand for AI computing chips may exceed expectations.