May twenty-fifth, two thousand twenty-five (250512-250525)
First, an update on the basic positioning of global markets as they stand now:
1/ The U.S. session traded long-bond volatility (the twenty-year auction came in below expectations, and the 30-year yield reached its highest level since 23) alongside renewed tariff threats (a 25% levy on iPhones forcing production to move back + the EU’s 50% tariffs taking effect in 6 1)... The former was related to Moody’s downgrade late last week and also to the House’s passage of the tax bill. We discussed both in detail before the market reaction; if you haven’t read it, go back and review Notes.
To save you time, here are the key provisions of the tax bill; read the details yourself..
a) Extend the tax cuts for 17 years, which were originally set to expire at the end of 25; b) introduce new tax cuts, including deductions for consumption, overtime pay, and interest on loans for domestically made cars; 3) cut government spending—skip this part, since most of it takes effect after 2029; 4) stimulate domestic investment by allowing a 100% deduction for domestic manufacturing facility expenses; 5) continue funding military and border operations.
The trend of widening deficits will not change. Another point is that As we approach the second half of the year, domestic U.S. noise will to some extent overshadow tariffs This is also what we expected at the beginning of the year; that has not changed. The second half of the year is when U.S. domestic policies will gradually take effect.
Markets are markets, and the economy is the economy. Do not assume that the financial assets you buy are actually tied to the real economy. The reason markets and the economy are fundamentally disconnected is that the former grows tired of existing information, while the latter continues to respond to it. In other words, once something is no longer new, Wall Street has already moved on from it; for the economy, though, that is when it has only just begun.
Markets are focused on incremental information has an almost incomprehensible fixation on it.
Business activity picks up (PMI),Corporate sentiment remains very weak, though it has eased somewhat. Prices are rising at their fastest pace since 22 8. Surveys attribute the improvement and continued price increases to companies getting ahead of tariffs: rushing to buy, hoarding, and profiteering. There are different explanations for exactly what this means, What has not changed is Historically, tariffs have had a greater impact on investment than on consumption; that is why we are watching Saudi Arabia rather than China and Europe. The former is also linked to the oil market.
2/ Europe: the economy is trending downward, though changes in the data are relatively small and still amount to noise;... ECB lowers its growth forecast and raises its inflation forecast, Germany stands out; the other countries show a mixed picture.
3/ Japan: long-term bonds, inflation driving bets on tighter monetary policy; officials say they did not discuss exchange rates with Bessent at the G7 meeting, This seems intended to avoid any appearance of currency intervention.
Economically, Leading indicators of capital expenditure have been rising, but demand is falling.
4/ The East: industrial output is growing, fixed-asset investment is increasing (but below expectations), and consumption is slowing...
The industrial recovery means the broader economic slowdown is not a major concern, but policy priorities will constrain spending incentives: there is a floor, but little upside.
Cross-asset weekly review (250525)
1) TLT, SPX, and USDX
Figure: TLT, the U.S. Dollar Index, and SPX all declined together
The move confirms the signal: this week’s break of TLT brought the U.S. Dollar Index back below 100, while SPX also moved lower.
Figure: Before the auction
Before the breakout, we
had already opened short positions in the U.S. Dollar Index and positioned ourselves ahead of time, waiting for the market to play out:
(Ahead of the market, developments, and news)
Figure: Trade entry
Figure: Some additional details
For a more in-depth account of how the U.S. Dollar Index trade was implemented, see:https://www.meridianresearch.app/home?product=vega-trading
2) Gold
Figure: Still battling around three key levels
Since exiting at the top, gold has been range-bound.
3）Bitco
ATH, however, Without cross-asset confirmation, the actual high may not be far off..
We have not added to the trading position; we are only holding the core position and lean toward selling once it reaches the target level.
Figure: Four rectangles
4）EURUSD、USDJPY、USDCHF
Figure: EURUSD
After the expected break below the lower boundary, it has returned to the trading range; the U.S. Dollar Index is expected to fall below 100. If the breakout is confirmed across assets, we will enter again.Relatively speaking, EUR is the best currency pair to trade, though we are also watching the others.
Figure: USDJPY
Equities, currencies, and gold are all one trade.
After the expected break above the upper boundary, it has returned to the trading range. If the breakout is confirmed across assets, we will enter again.
Figure: USDCHF
Let’s also update CHF’s key prices.
5）Oil
This week’s Notes gave us reasons to stay short on oil prices for the following reasons:
Steady turbulence: the market will be disrupted by news and random bursts of gunfire,
We will move the corresponding points of contention lower.
Figure: Points of contention move lower (60)
A delicate balance often signals dangerous volatility.
6）Platinum
Figure: 1100 is an important breakout point
The weekend is over. Wishing everyone reading this a happy life and a smooth week ahead!
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Note: All content in this article is for reference only and does not constitute investment advice or serve as a basis for any laws, regulations, or regulatory policies. Investors should not make decisions based on or rely on this information.