SignalPlus Macroeconomic Analysis Special Edition: Summer Break

This week, there are not many new developments to report, as the S&P 500 index has recovered from the impact of the non-farm payroll data and is approaching historical highs again. On the other hand, the Nasdaq index benefited from strong earnings reports, setting a new record, ignoring the ongoing political turmoil of the Trump administration and the new import tariff issues.

Global risk assets also performed well, with European and Japanese stock markets rising due to ongoing trade solutions, while the United States made concessions on tariff stacking and automobile tax reductions.

On the other hand, the US-China trade truce agreement is set to expire this week, and some market participants expect the deadline to be extended again, but there are also concerns that the US may impose new tariffs due to China's purchase of Russian oil — India has already been sanctioned for similar behavior.

The good news is that the United States and Russia plan to draft a new Ukraine peace agreement before this week's Alaska summit, which provides another tailwind for risk assets and has lowered oil prices due to the continued decline of war premiums.

Capital flows in the United States remain strong, with domestic and foreign investors returning on a large scale. The latest data shows that net purchases have set a new monthly inflow record, and trading volume has also reached a new high, providing positive confirmation.

In 2025, the trading volume of the US stock market reached a historical high, far exceeding previous years, mainly due to the strong return of retail trading from the beginning of the year to now. According to Citigroup data, the average daily trading volume in the first half of 2025 was nearly 50% higher than the average level of the previous five years, marking a significant increase of 40% compared to the previous record set in 2024. This trend continued in July, with the average daily trading volume reaching 18 billion shares.

In fact, 2025 has been so remarkable that 17 of the 20 largest single-day trading volumes in history occurred in 2025, with 13 of those days happening in just the second quarter. Absolutely unbelievable.

Since the beginning of the year, retail participation has driven a very high concentration of individual stocks, with the trading volume of the top five stocks exceeding 20% of the total market volume on certain trading days in 2025. Retail activity in call options has also rebounded significantly, reaching its highest level since the COVID-19 pandemic.

In terms of financial reports, about 80% of the S&P 500 companies that have released their earnings exceeded expectations, with a year-on-year growth of 12% and an average surprise of 9%, led by the technology and financial sectors. Against the backdrop of lowered expectations after tariff concerns, the earnings per share for the second quarter of 2025 significantly surpassed expectations.

The current rebound has pushed the probability of recession expectations in the stock and credit markets back to single-digit lows. The U.S. fixed income market, as usual, is an exception, pricing in the Fed's further easing most aggressively.

In terms of inflation, although the Federal Reserve has expressed a willingness to overlook recent price pressures, the ISM (Institute for Supply Management) sub-index data shows a concerning rebound in payment prices, which often leads the CPI by about a quarter. This could complicate the Federal Reserve's plans for interest rate cuts later this year. However, for now, driven by risk appetite, the market is happy to maintain high levels until hard data proves otherwise.

Cryptocurrency also experienced a similar rebound this week, primarily driven by Trump's headline statement ordering regulators to "study" the possibility of including cryptocurrencies (and private equity) in 401k investment portfolios. If this move materializes, it would clearly open up significant buying demand. However, there is still a long way to go before it could become law.

Even more exciting is that Ethereum led the rise this week, with a weekly increase of +20%. The latest mainstream experts/followers have touted ETH as the latest FOMO (Fear of Missing Out) target in the public equity space. Retail traders are responding actively, pushing BNMR up nearly 60% this week, demonstrating to 'native gamblers' how to properly engage in FOMO in a regulated world.

As expected, Ethereum ETF saw an additional inflow of approximately $700 million in the last two days of this week, driving the cumulative inflow to a historic high. The total assets under management have doubled since the beginning of the year to nearly $10 billion (vs $3 billion at the beginning of the year).

The recent rebound of ETH has also led to a divergence in short-term volatility, with Bitcoin's implied volatility still hovering near historical lows, while ETH's volatility has surged significantly. The term structure of ETH is currently inverted, with long-term volatility expected to drop to around 70%, while BTC's IV curve is the opposite, with short-term volatility severely compressed, and the spot market lingering around $120,000. For comparison, a month ago the market priced in only a 5% chance of ETH reaching $4,500 in August, while the actual performance in the spot market far exceeded the implied path, catching many participants off guard.

Looking ahead, at the current juncture, we believe there is no strong necessity to chase the market high, as we anticipate that market assets will experience two-way fluctuations in about a month. Be cautious of potential downward catalysts such as a significant reversal of the dollar index or unexpected inflationary pressures. Traders, please remain vigilant, and wish you successful trading!