SignalPlus Macro Analysis: The market currently predicts a probability of over 75% for interest rate cuts starting in June

Yesterday, the European Central Bank maintained interest rates, but significantly lowered growth and inflation forecasts, expecting price trends to revert to policy targets by 2025. Although President Lagarde made almost no comments on the pace of rate cuts, she did reveal some dovish information during the Q&A session:

Dovish comments from the press conference included:

• "Labor demand is slowing down"

• "There are signs that wage growth is starting to slow"

• "Inflation is expected to continue its downward trend in the coming months"

• "Long-term inflation expectations remain roughly stable around 2%"

• "The risks to economic growth are still tilted to the downside"

• "We have made progress in combating inflation"

• "We are more confident in achieving our goals, but it is still not enough," "We will not wait until we reach 2% to make decisions"

The European Central Bank seems to have laid the groundwork for a hold in March, while the market currently predicts a probability of over 75% for rate cuts starting in June. The European Central Bank rarely cuts rates ahead of the Federal Reserve; will the two central banks synchronize easing in early summer as a gift to the market? It seems very likely!

Global bond yields fell due to the dovish European Central Bank meeting, and risk assets rose again without hesitation. Meanwhile, both Fed Chair Powell and Mester indicated that as long as inflation continues its current downward trend, rate cuts this year would be "appropriate."

In the stock market, thanks to the European Central Bank and the boost from chip equipment manufacturer ASML's stock price, the European Stoxx 600 index reached an all-time high. In the U.S., the Nasdaq and SPX indices rose by 1.5% and 1%, respectively. The Nvidia GTC conference, scheduled for this month from the 18th to the 21st, may be the next event impacting AI and tech stocks, although it seems just a matter of time before this chip giant catches up to Apple in market capitalization.

In terms of stock picking "alpha," the implied correlation of SPX leaders has dropped to near historical lows, reflecting that the index's rise depends on a very small number (or perhaps just one?) of stocks, essentially coexisting with AI? The market has not left us much choice.

With risk sentiment soaring, Wall Street has once again brought past products to the forefront, allowing retail investors to lose money in a very compliant casino. The SVYX ETF was one of the most popular "income ETFs" in the past, allowing investors to profit by shorting volatility (VIX futures) through ETF products. This "strategy" achieved a 250% return in 2017 (with almost no drawdown), but as volatility suddenly surged in early 2018 ("volmageddon"), the strategy faced a -95% loss within 48 hours.

The market is fearless, and after a few years of rest, Wall Street has once again launched a similar ETF structure, but this time using 0 DTE covered call options (i.e., same-day expiration options) as an income strategy, which may extend to directly shorting 0 DTE volatility or in leveraged forms.

Speaking of options, the U.S. SEC (not surprisingly) postponed the approval of BTC spot ETF options submitted by companies like Nasdaq and CBOE. The final deadline for the agency to approve or reject these cryptocurrency ETF options is April 24. We believe that the inclusion of options in the cryptocurrency market is just a matter of time, and the SignalPlus platform is ready to meet all your cryptocurrency options needs, helping you seize opportunities in the market!