March second, two thousand twenty-five (250224-250302)
One, Policy & Market Timing
Understanding the pace of policy is crucial; the market is currently caught between competing policy forces.Policy essentially has two poles: restrictive executive orders (orders imposing restrictions) and growth-positive policies (policies that support growth).Since Trump took office, he has signed more than 15 executive orders, mainly focused on negative shocks such as tariffs and immigration, while Growth-focused measures (such as tax reform) must go through the congressional legislative process, so implementation takes longer.
In this situation, the key issue is timing.With market expectations for economic growth weakening, attention should be paid to when positive fiscal policies will become visible, especially the actual timing of the long-term stimulus measures now advancing through Congress. In terms of timing, policy changes in 2025 will mainly consist of quickly implemented measures such as tariffs and immigration, weighing on markets, while 2026 will be the stage when fiscal stimulus is actually implemented and growth recovers. Therefore, The market’s earlier move was not excessively pessimistic; it followed the policy timeline as it unfolded.
Two points need to be made clear: (1) the market may be overestimating the positive impact of tax reform, since most measures merely extend tax benefits that are about to expire and do not truly introduce large-scale new tax cuts; (2) tax reform takes time to advance, and even if the process is accelerated, it may not be implemented until the second half of 2025 at the earliest.
Two, Labor Market & Consumer Confidence
Concerns about a slowdown in U.S. economic growth have risen noticeably over the past two weeks. Retail sales, real consumption, and new home sales have all declined, while consumer confidence has also fallen. The confidence indexes from the University of Michigan and the Conference Board have retreated, mainly because inflation expectations have risen—Recent inflation data have not risen sharply; rather, market concern is growing that tariffs could trigger a new round of price increases.
However, the concern is not very significant; the inflation trend does not change the Fed Policy Path,For the remainder of 2025, core PCE inflation is likely to stay near its current level, under the influence of two forces that offset each other:
1 / Economic slowdown → Disinflation pressure (tariffs weakening economic fundamentals and creating disinflationary pressure)
2 / Tariffs & cost-push effect → Inflationary risk (the cost-push effect of tariff policy)
Further reading: Notes 240729 PCE and the Fed’s inflation target
From the labor-market perspective, the rebalancing of labor supply and demand is still under way. Data such as job vacancies and the quit rate show that labor-market tightness is easing. Wage growth is slowing, The catch-up in sticky prices over the past few years is gradually fading, and the YoY price increase in 2025 1 has already fallen below the level for the same period in previous years.
Further reading: Notes 240729 PCE and the Fed’s inflation target
Further reading: Notes 241230 Inflation catch-up in macro data: consumer prices and input costs
This also means that the decline in U.S. stocks has a floor, and the path of both macro and micro factors weighing on markets at once may be close to 0, in this economic context, the Fed has no urgency to cut rates in the short term, but the probability of a positive surprise from rate cuts is also not low. The baseline scenario still points to two rate cuts in 2025 (6 & 12); if growth is strong, the timing of rate cuts will be delayed, while if growth remains weak and the labor market also softens, the pace will accelerate.
For now, the Fed’s policy path remains highly dependent on the data, so volatility on data-release days will certainly remain high this year, That’s why 25 is a golden year for traders. 2025 = Year of Trading Opportunities.
Three, U.S. & China
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Note: All content in this article 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.