GuShiio.com ① The revision of market expectations and policy uncertainty drove U.S. stocks down;
② The volatility skewness of U.S. bond interest rates implied options and the trend of speculative net positions in U.S. bond futures continue to diverge.
1. The revision of market expectations and policy uncertainty drove U.S. stocks down.
In February 2025, the S & P 500 index fell 1.42%, and the top seven U.S. stocks fell 8.73%. How to understand the decline in U.S. stocks in February 2025? On the one hand, the U.S. economic surprise index continued to fall, and the revision of market expectations brought adjustment pressure on U.S. stocks; on the other hand, Trump’s policy uncertainty also caused disturbance to the market, and rising inflation expectations limited the Federal Reserve’s space to cut interest rates, giving U.S. stocks brought downward pressure.
2. The volatility skewness of implied options in U.S. bond interest rates and the trend of speculative net positions in U.S. bond futures continue to diverge.
In February 2025, the volatility of long-term U.S. bond interest rates implied options fell from 0.92% to-1.21%, while the speculative net position of U.S. Treasury futures rebounded from 28584 lots to 40912 lots during the same period, indicating that the market’s expectation of U.S. bond interest rates may continue to diverge. The U.S. bond volatility index fell to its lowest level since the beginning of 2022, reflecting that U.S. bond interest rate traders hold a wait-and-see attitude towards the trend of U.S. bond interest rates.
3. Calls for European defense autonomy pushed up the price of German military stocks soaring.
After winning the election, Merz, who won the German Chancellor’s election, discussed with the Social Democratic Party to raise up to 200 billion euros in defense budget spending through debt financing, mainly for the purchase of ammunition, long-range missiles and other equipment, directly benefiting European military companies such as Rheinmetall. At the same time, the German government plans to finance defense by significantly increasing bond issuance, which has led to market expectations of an increase in the supply of government bonds, which has triggered an inversion of German government bond yields and interest rate swaps.
4. Global fund managers expect the best performing asset in 2025 to be global stocks.
According to the Bank of America Global Fund Managers Survey in February 2025, global fund managers expect the best performing assets in 2025 to be global stocks, gold, U.S. stocks, bitcoin, government bonds, cash and corporate bonds; The best performing stock indexes in 2025 are the European Stokes Index, the Nasdaq Index, the Hang Seng Index, the Russell 2000 Index and the Nikkei Index. Compared with the survey results in January 2025, global fund managers significantly lowered their expectations for U.S. stocks in February 2025, while significantly raising their expectations for European stocks.
5. The European banking sector has risen for ten consecutive weeks.
The European banking sector has risen for ten consecutive weeks and is by far the best sector in Europe, with a year-to-date increase of 24%. European banks reported results showing that falling interest rates had not harmed their businesses, while economic resilience and a massive share repurchase program also added momentum. At the same time, the strength of the European banking sector is also related to economic recovery expectations and rising risk appetite brought about by the easing of the conflict between Russia and Ukraine. The European banking sector remains strong against the background of valuation repairs.
6. Bitcoin maintains a high correlation with the Nasdaq 100 Index.
Bitcoin has a good correlation with the Nasdaq 100 Index, with a rolling correlation coefficient of 0.70 over the past 120 days. Behind the correlation between the two are both common macro risk exposure and micro transaction structure reasons. From the perspective of macro risk exposure, both Bitcoin and technology stocks are regarded as high-risk, high-growth assets and are highly sensitive to market sentiment. From the perspective of micro-transaction structure, the deep participation of financial institutions and technology giants in Bitcoin has become the link between the two.
7. Trump announced a review of imported copper, which significantly increased COMEX copper premium.
The Trump administration launched an investigation on February 25, 2025 to impose additional tariffs on copper imports on the grounds of “national security.” Since the United States relies heavily on imports for copper consumption, tariff expectations have pushed up market concerns about increased import costs, prompting COMEX copper prices to respond in advance, resulting in a significant expansion of the LME premium. At the same time, commodity traders are actively shipping copper to the U.S. market, with copper inventories on the New York Mercantile Exchange reaching 93,500 short tons, the highest level since the beginning of 2019.
8. Global energy prices fell amid expectations of easing the conflict between Russia and Ukraine.
WTI crude oil futures prices fell below US$69/barrel, reaching their lowest level since December 2024. Trump’s push for a quick end to the Russia-Ukraine conflict may lift sanctions against Russia and increase global oil supplies. Amid the dual concerns of increased supply and weakening demand prospects, WTI crude oil prices fell significantly, while hedge funds ‘speculative net positions also fell simultaneously. At the same time, the spread between European natural gas futures summer and winter contracts has also narrowed significantly, reflecting the market’s optimism about supply prospects and the Russia-Ukraine conflict peace talks.
9. ETF funds were significantly withdrawn against the background of a strong rise in the A-share technology sector.
Although the Hang Seng Technology Index rose by 17.88% in February, while the A-share technology sector index rose sharply, ETF funds showed signs of net outflow, reflecting the internal division and the logic of fund transfer. On the one hand, there is the pressure of profit-taking, and sectors such as the Science and Technology Innovation 50ETF and semiconductor ETF that have experienced large increases in the previous period have experienced capital withdrawal; on the other hand, there are differences in the medium and long-term confidence of domestic and foreign investors in China assets, and we need to wait for policy implementation and performance verification.
10. The 60-day historical volatility of China’s 10-year treasury bonds has reached its highest level since 2020.
Since the beginning of this year, against the background of tight balance of liquidity, market differences have increased, which has intensified the volatility of the bond market. As of the end of February 2025, the 60-day historical volatility of 10-year treasury bonds has reached its highest level since April 2020, close to the level in the early stages of the epidemic. How to understand the increase in bond market volatility? First, the tight balance of funds has brought liquidity pressure to the national debt market; second, there is pressure on capital outflow in the national debt market under the seesaw effect of stocks and bonds.
Risk warning: The Federal Reserve’s monetary policy exceeded expectations, global geopolitical risks intensified, and global trade conflicts intensified
