May twelfth, two thousand twenty-five to May thirteenth, two thousand twenty-five

I. Foundation 

resistance to change and hence greater dependability for the results shown in the past.

II. Insights 

Our Viewpoints and ideas on market.

III. Market Pulse 

Our latest Comments on the economic and market environment

(Causal Chain) Ships are on the way: if tariff cuts come before 520

Over the weekend, the US and China will meet. Even before the meeting, media outlets had begun reporting that the US might lower tariffs on China after trade negotiations, but The shipping data and supply-chain timing themselves show that the window for tariff adjustments had already become apparent.

After Chinese export shipping plunged at the end of 4, it rebounded noticeably in the first week of 5，The Port of Los Angeles also expects a large number of ships to arrive in the third week of 5...the timing corresponds exactly to ships that left China at the start of 5.

Shipping data isn't baseless.

Previously, Walmart, Target, and Home Depot—the three retail giants—met privately with the White House during the week of 4/24, explicitly warning of “shelf clearance risk”; the meeting was reportedly productive, and afterward the giants resumed placing orders with China.The timing of these major retailers' orders matches exactly the turning point in the rebound of shipping data, forming a plausible causal chain.

This first batch of replenishment ships is expected to arrive in 5/12 (clearly closely aligned with the policy window, just after the US–China trade meeting over the weekend); a much larger number of ships will arrive before 5/20.

Another fact is that this had already happened during the COVID period, when North American giants also began policy front-running, It is commonplace in US business history for large retailers (providers of campaign funding) to receive insider information, Under the US business–political system, anyone who genuinely believes in “equal treatment for all” is exceedingly naive.

Chart: US-listed retail stocks are a key signal to watch closely before 20

Large retailers receive insider heads-up in advance, while small and medium-sized businesses lag by at least 1 months.

Therefore, 5/12 and 5/20 are two key points for monitoring shipping schedules and policy implementation, If no adjustment is observed by then, the preceding inference needs to be reassessed; if it is implemented, that would indicate this shipping spike reflects “those in the know” pricing in their expectations for the policy path.

Worth keeping a close eye on.

2025.05.12

Unemployment logic and credit assets

In credit markets, the most important variable is—unemployment.

In fact, If it does not rise significantly, there will be no room for credit risk to be priced in, even if GDP falls into zero growth or even slightly negative growth, credit investors can still “survive.”

The market's prevailing expectation can essentially be summed up as: “Things will get very bad soon,”Their chain of reasoning is:

1) Disruptions to imported goods; shortages lead to weaker consumption + excess capacity and excess labor in supply chains

2) Falling consumption leads companies to lay off workers and unemployment to surge

3) It ultimately falls into recession rapidly, possibly accompanied by stagflation

But a key link in this chain is that unemployment may indeed not worsen rapidly

First, US consumers may still be willing to pay higher prices to keep getting goods, This is true of many goods, because their prices are not as sensitive as the market imagines.

Second, For overseas producers, having orders to fulfill is actually more important, and for a long time they may be willing to “pay tariffs out of pocket” to keep exporting and maintain orders and cash flow.In real-world industries, if you actually talk to some business owners, for them losing less is better than shutting down completely, and earning less is still a win.

Third, tariffs have moved from being a trade on expectations to actual implementation, and we are now in a period of negotiations and fine-tuning. If inflation or unemployment indicators worsen, the US government will face domestic political pressure; governments in exporting countries face employment problems at home as well. Both sides therefore have incentives and leverage to negotiate, At least the situation is unlikely to get “worse”.

For US domestic companies, this also means expectations will shift from tariffs being implemented to the outcome of negotiations. If the situation is only temporary and workers are difficult to replace quickly after layoffs (everyone learned this lesson once during the pandemic), they may choose not to lay off workers yet. Moreover, over the medium term the US is promoting domestic substitute production; although this transition will push inflation higher, it will instead provide a floor for employment.

Finally, Structurally, the US is facing reduced immigration and the retirement peak of the baby-boom generation, which will automatically shrink labor supply—even without layoffs, labor-force participation will fall, thereby masking an increase in unemployment.

Therefore, unemployment may—and is likely to—avoid significant deterioration, while inflation may indeed rise again and growth may enter a stagnant range.（See Notes250428 for another, more likely combination of paths that is counterintuitive at the macro level) That is, A structure of low growth, low unemployment, and high interest rates will persist for a long time, which also means the credit market may outperform on a relative basis.

The reasoning about unemployment in this Notes entry can also be applied to judgments about Fed policy, which is why we are more pessimistic than market expectations.

2025.05.13

Note: Everything in this text is for reference only, does not constitute investment advice, and is not a basis for any laws, regulations, or regulatory policies. Investors should not use or rely on this information as a basis for making decisions.