Global funds focus on China and the United States! The Two Sessions, Trump's speech, and non-farm payrolls attract widespread attention as the stock market continues to play out the "East rises, West falls"?

According to the Zhitong Finance APP, in the first trading week of March, a series of major events and important economic data are set to emerge, drawing the attention of global investors to the two superpowers, China and the United States. Any movements regarding policies and economic data from both countries will have a significant impact on the stock markets of China and the United States, as well as the global stock market trends.

Some Wall Street analysts expect that the Chinese Two Sessions will bring significant signals from the demand side, adding a "super fire" to the investment frenzy in Chinese tech stocks led by DeepSeek since February, driving up tech stocks and "big consumption," and continuing the recent stock market trend of "East rising, West declining." Meanwhile, Trump's latest remarks, U.S. economic data, and large retail company earnings reports will determine whether the so-called "stagflation" expectations will heat up or cool down, which is crucial for the weak U.S. stock market this year.

This week, global investors will face critical events including the Chinese Two Sessions, President Trump's first speech to lawmakers on economic, policy, and popular issues since taking office in January, the U.S. non-farm payroll report, and a series of key earnings reports from major U.S. retail companies. The importance of these retail company data lies in the fact that they may provide key clues about the significantly weaker-than-expected U.S. economic trends and the current fatigue in consumer spending since the beginning of this year—whether it will exacerbate market concerns about the so-called U.S. economic "stagflation" or ease market anxieties.

With the comprehensive rise of the domestic AI startup DeepSeek, leading a new "AI large model computing paradigm" centered on "low cost" and "high efficiency," DeepSeek is beginning to deeply integrate with various industries such as healthcare, finance, and education, as well as AI application terminals like consumer electronics, bringing innovative AI products/services. This is expected to drive sales and operating profits in China's semiconductor, SaaS software, cloud computing, and all industries into a new growth paradigm, boosting global investors' bullish sentiment towards Chinese stocks. Especially for the giants that significantly benefit from the demand for inference computing power—namely Alibaba and Tencent, which have strong cloud AI computing systems, as well as other tech giants like the three major domestic telecom operators, the bullish sentiment has further intensified since February.

If the Two Sessions in March release important catalysts regarding the demand side, the wave of domestic consumption upgrades driven by policy support is expected to significantly boost sales expectations in AI + SaaS software, cloud AI computing resource systems, and even in tech fields like AI smartphones, AIPC, and AI + AR smart glasses. More importantly, the long-dormant Chinese consumption giants are also likely to rebound significantly under the heavy economic policy catalysts that boost demand, rather than just the tech stocks led by the "Ten Chinese Tech Giants" since February driving the stock index up. At that time, funds are expected to continue flowing from the sluggish U.S. stock market into the Chinese stock market (both Hong Kong and A-shares) under the rise of technology and consumption, realizing a long-term bull market trend of "technology + big consumption" rising together.

On the U.S. economic policy front led by the Trump administration, new tariffs on Canada, Mexico, and China will officially take effect on March 4, rather than proceeding with trade negotiations as previously expected to push the U.S. government to halt the tariff increases. Therefore, after Trump announced the upcoming tariffs, global stock markets, including the U.S. stock market, collectively plummeted Especially the new tariffs on Chinese goods have intensified the trade war between the two major global economies, raising concerns about a new round of global trade war, and have exacerbated financial market worries about the U.S. economy falling into "recession" or "stagflation," given that recent economic data and consumer inflation expectations indicate a resurgence of inflation, along with a decline in U.S. consumer confidence that far exceeds expectations.

Trump's speech at the joint session of Congress this Tuesday is crucial, as it will determine whether U.S. tariff policies will escalate further, whether the DOGE (Department of Efficiency of the U.S. Government) led by Musk will take new actions regarding government budget cuts, and when economic policies aimed at growth, such as domestic tax cuts, will be introduced. Additionally, the White House will hold its first cryptocurrency summit on March 7, which Trump will preside over, and this meeting is vital for cryptocurrencies like Bitcoin that have been experiencing continuous declines recently.

Last week, Trump officially announced new tariffs on China, Canada, and Mexico, a move that significantly raised U.S. consumer inflation expectations while severely damaging consumer confidence. Consequently, global stock markets plummeted under the "tariff storm" triggered by Trump last Friday, while U.S. Treasury bonds and the dollar surged amid safe-haven buying.

In the past week, the performance of major U.S. stock indices was mixed: the Dow Jones barely achieved a weekly gain, while the Nasdaq Composite Index, dominated by technology stocks, saw a weekly decline of nearly 4%, erasing all gains for the year and turning into a 2% loss. The S&P 500 index, after hitting its lowest point of the year, barely maintained positive territory as it entered March.

The earnings report released last week by "AI chip giant" Nvidia (NVDA.US) showed that investment in artificial intelligence remains strong, but due to the significant rise in stock prices over the past two years combined with high market expectations, and the unclear path for AI monetization in the U.S., the "U.S. computing power surplus expectation" driven by DeepSeek has not been significantly alleviated, leading to a final drop of over 9% in the stock that week.

The U.S. non-farm payroll report for February, to be released on Friday, is expected to show moderate job growth last month, with the unemployment rate remaining unchanged at 4%. Combined with the earnings reports from retail companies such as Target (TGT.US), Costco (COST.US), Kroger (KR.US), and Abercrombie & Fitch (ANF.US), this will provide more interpretive perspectives on the deteriorating outlook for the U.S. economy and the state of U.S. consumers.

These market dynamics set the stage for March trading, as U.S. stock investors currently face multiple uncertainties: the approaching tariff deadline, the upcoming Federal Reserve interest rate decision, and market concerns about the U.S. falling into a trough, which may drive more profit-taking funds toward Chinese and European stock markets. The Atlanta Fed's GDPNow model updated its data on Friday, significantly lowering the U.S. Q1 GDP annualized growth rate from 2.3% to -1.5%.

Under the Investment Boom Surrounding AI and Resonance with "Big Consumption," China's Stock Market is Expected to Continue Rising

The epoch-making "ultra-low-cost AI large model" launched by DeepSeek has become an unprecedented "bull market catalyst" for global investors to reassess Chinese assets, especially the Chinese stock market (including Hong Kong stocks and A-shares), who were already concerned about the soaring valuations of U.S. tech stocks. The emergence of DeepSeek has completely ignited a global funding frenzy—encompassing leveraged hedge funds and traditional asset management giants—around the unprecedented investment wave in China's artificial intelligence sector.

Despite facing restrictions from Western countries on importing the most advanced chips, the development costs of DeepSeek's applications are far lower than those of American competitors. This release caused the market value of "AI chip giant" NVIDIA to evaporate by over $500 billion in a single day. The debut of DeepSeek-R1 can be seen as a significant announcement to the global open-source large model field, as AI training/inference enters a paradigm of "extreme data compression + efficient reinforcement training + specialized data optimization + greatly simplified AI inference computing architecture" at an extremely low cost.

With an investment cost of less than $6 million and under the conditions of 2048 chips with performance far below H100 and Blackwell's H800 chips, the DeepSeek team has created an open-source AI model with performance comparable to OpenAI's o1. In contrast, the training costs for Anthropic and OpenAI reach as high as $1 billion, while DeepSeek's pricing for inference input and output tokens can be described as "deeply discounted." DeepSeek charges only $2.19 per million output tokens, whereas OpenAI's GPT-4 costs as much as $60.

Looking ahead at AI application trends, as DeepSeek leads the way in the "ultra-low-cost AI training/inference" new paradigm that significantly streamlines the deployment workload of large AI models, killer generative AI applications covering various industries on the B-side or C-side, as well as "AI agents" that are likely to greatly enhance human productivity, are expected to experience explosive growth. This is also why global funds have recently flocked to software stocks, especially Chinese software giants with significant valuation advantages, and Chinese AI infrastructure suppliers under the backdrop of "domestic chip substitution."

Regarding the potential stock market benefits from the upcoming Two Sessions, the analysis team from Wall Street giant Goldman Sachs expects that the forthcoming "Two Sessions" will reaffirm an expansionary fiscal policy stance and provide more specific implementation details for demand-side stimulus, which may drive A-share returns to exceed those of Hong Kong's H-shares, mainly because A-shares are more sensitive to policy statements and have a broader industry distribution. In terms of capital flows, Goldman Sachs predicts that as global funds further increase their allocation to the Chinese stock market, the Hong Kong stock market, led by the "Ten Technology Giants," may continue to be favored globally. If the positive outlook from the meetings encourages more participation from domestic retail investors, A-shares may receive even greater support The highly anticipated 2025 Two Sessions will be held in Beijing on March 4. According to Xinhua News Agency, the Standing Committee of the 14th National Committee of the Chinese People's Political Consultative Conference decided that the third meeting of the 14th National Committee of the Chinese People's Political Consultative Conference will be held in Beijing on March 4, 2025; the third meeting of the 14th National People's Congress will be held in Beijing on March 5, 2025. The press conference for the third meeting of the 14th National People's Congress will be held at 12:00 on March 4, 2025 (Tuesday) in the press hall of the Great Hall of the People, where the conference spokesperson will answer questions from Chinese and foreign journalists regarding the conference agenda and related issues of the National People's Congress.

Since the launch of DeepSeek-R1, the logic behind the "Seven Giants" leading the U.S. stock market, including Nvidia, Microsoft, and Google, has fundamentally changed, as investors have begun to strongly question the reasonableness of the U.S. tech giants' seemingly fanatical AI cash-burning plans. Except for Meta, the stock performance of other giants has significantly underperformed the S&P 500 index, becoming the core negative catalyst dragging down the overall rise of the U.S. stock market.

The "Ternific 10," which includes Alibaba, Tencent, Meituan, Xiaomi, BYD, JD.com, NetEase, Baidu, Geely, and SMIC, has been propelled by the domestic AI large model deployment frenzy brought about by DeepSeek since February, leading the market to generally believe that these ten Chinese giants will be the core beneficiaries of the global AI boom, driving their stock performance far beyond that of the "Seven Giants"—Apple, Microsoft, Google, Tesla, Nvidia, Amazon, and Meta Platforms—that have led the U.S. stock market into a long-term bull market since 2023. Jeff Weniger, head of equity strategy at WisdomTree Asset Management, bluntly stated in a tweet that the "Seven Giants" of the U.S. stock market are making way for China's "Ten Giants."

If the Two Sessions release significant positive news regarding the demand side, driving technology stocks and consumer stocks to rise together, Goldman Sachs' anticipated long-term bull market in the Chinese stock market is expected to gradually unfold. After experiencing the "DeepSeek shockwave" that severely impacted U.S. tech giants, Goldman Sachs has shown bullish enthusiasm for the Chinese stock market. The Chinese equity research team at Goldman Sachs expects that the widespread adoption of AI over the next decade will drive overall earnings of Chinese stocks to increase by 2.5% annually, and Goldman Sachs has raised the target points for the MSCI China Index and the CSI 300 Index to 85 points and 4700 points, respectively The MSCI China Index has entered a "technical bull market," covering core Chinese assets such as Alibaba, Tencent, Kweichow Moutai, and China Yangtze Power, currently hovering around 72 points. The CSI 300 Index is around 3,890 points, and according to Goldman Sachs' bullish expectations, both indices have a potential upside of nearly 20%.

As the "low-cost + high-performance" AI large model led by DeepSeek brings more hope to the growth prospects of the Chinese economy, the Goldman Sachs team also pointed out that strong policy stimulus will be an indispensable momentum for the sustained rise of the stock market, overcoming macroeconomic challenges. This is why Goldman Sachs believes that the important signals released during the Two Sessions are crucial for the trajectory of the bull market in Chinese stocks.

On Wall Street, Goldman Sachs is not the only top institution bullish on the Chinese stock market. Another major Wall Street firm, Bank of America, stated that U.S. tech stocks are overvalued and overly held compared to Chinese tech stocks. The firm expects a large-scale rotation from the $16 trillion market cap "Seven Giants" in the U.S. to the $1 trillion market cap "BATX" in China (i.e., Baidu, Alibaba, Tencent, Xiaomi), and it also believes that if China's retail sales accelerate, the upward momentum in the stock market may expand from the tech sector to the consumer sector.

One of the world's largest hedge funds, Man Group, recently expressed optimism about the investment prospects in the Chinese stock market. Edward Cole, the head of equity allocation at the group, stated that Chinese stocks are one of the most certain trades this year, expecting that new appreciation brought by China's AI innovation will drive a rebound in investment. Cole also mentioned that the Chinese government's stimulus measures and investors' retreat from increasingly expensive U.S. tech stocks provide strong support for the Chinese stock market.

International banking giant UBS emphasized that software stocks in the Chinese stock market will be the core beneficiaries of the "DeepSeek integrates everything" trend, especially in areas such as enterprise workflow automation, knowledge management, and vertical digital solutions. UBS predicts that the market rally related to artificial intelligence in the Chinese stock market may not yet be halfway through, especially for software stocks like Alibaba, which have significant room for valuation improvement in the future. The UBS analysis team stated that the development of the AI industry typically drives a substantial increase in the valuations of related stocks. In the past 4G, 5G, and cloud computing eras, related stocks outperformed the overall market by 50% to 100%, and such rebounds usually last for 1 to 2 years.

With Trump's speech and non-farm payroll data approaching, will concerns about "stagflation" ease? Will U.S. stocks plunge into the abyss or rebound strongly?

The latest turmoil in the U.S. stock market and even the global stock market stems from Trump officially announcing new tariffs on China and plans to impose tariffs on Mexico and Canada starting next week. The new tariffs on Chinese goods have escalated the trade war between the two major global economies and raised concerns about a new round of global trade wars. Economists are warning that the tariffs on China, Mexico, and Canada could push the U.S. into a recession, which is also the logic behind the financial market's growing fears of the U.S. economy falling into "recession" or "stagflation." After all, recent U.S. economic data and consumer inflation expectations show that inflation is making a comeback, and the decline in U.S. consumer confidence and services PMI has exceeded market expectations.

In addition, as Trump failed to halt tariffs on global trading powers as the market had expected, concerns about so-called global "reciprocal tariffs" have begun to rise, and the tariffs on steel, chips, and pharmaceuticals under Trump's leadership will also be implemented as previously planned.

On March 4th, Eastern Time, Trump will deliver a speech at a joint session of Congress. Economists generally expect Trump's speech to focus on his policy priorities—such as tariffs, future economic plans, and foreign affairs agenda. If Trump signals tariff policies that exceed market expectations, it could be a significant negative for the U.S. stock market and global stock markets.

For years, the U.S. economy has faced predictions of recession and even stagflation, but the labor market has consistently been the core force delaying these concerns. Therefore, if non-farm payrolls are strong, concerns about "stagflation" or "recession" may ease.

Although the latest PCE report shows that the so-called "core PCE" (excluding food and energy items) recorded the smallest annual increase since early 2021, the report indicates that the decline in consumer spending exceeded expectations, raising concerns about the resilience of the U.S. economy. With recent economic data overall showing persistent inflation, coupled with weak consumer spending, a significant cooling of business activity, and unusually low consumer confidence, the market is hotly debating the possibility of the U.S. economy falling into "stagflation," which is the most troublesome economic issue for the Federal Reserve. In the context of "stagflation," the space for interest rate cuts will be severely constrained.

Therefore, Trump's upcoming speech and the non-farm payrolls are crucial for the market's insight into the U.S. economic outlook, especially if non-farm payrolls fall significantly below expectations, the expectations for "stagflation" may rise sharply, and the U.S. stock market could further decline.

Wall Street economists generally expect that last month, 143,000 new non-farm jobs were added, and the unemployment rate remained at 4%. However, signs of weakness in the labor market have been evident for several months: the number of initial jobless claims has risen to a yearly high, and the number of people continuing to receive unemployment benefits has been climbing. The Job Openings and Labor Turnover Survey (JOLTS) shows that the number of job vacancies continues to decline, and the ratio of job vacancies to unemployed persons is rapidly approaching 1:1.

Washington's policy direction also adds uncertainty to the employment outlook: the federal employee downsizing policy led by Musk's DOGE will continue to impact employment data in the coming months. Capital Economics economist Bradley Saunders pointed out: "Despite high public attention, the Trump administration and Musk's recent triple blow to federal employees—hiring freeze, voluntary separation compensation, and mass layoffs of probationary employees—has a negligible impact on February's non-farm payroll data."

However, the situation may be more severe in the long run. Bank of America economist Aditya Bhave noted: "Considering the government's plans for further reductions in the federal workforce, the scale of layoffs may continue to expand over time. We estimate that the direct impact of the policy could lead to a reduction of more than 200,000 federal employees by the end of this fiscal year (note: the U.S. fiscal year ends on September 30)." The economist also warned that federal contractors may adjust their hiring plans due to congressional budget cuts, and the consumption contraction of unemployed federal employees will also drag down overall economic activity. Bank of America summarized: "In short, the reduction in the federal workforce poses an upside risk to our year-end unemployment rate forecast of 4.2%."

The earnings reports of every U.S. retail company tell two stories: the company's own narrative and the overall picture of the U.S. economy. The three major retailers set to report earnings this week—Costco, Abercrombie & Fitch, and Target—will provide dual annotations.

Costco has been a market winner for decades; however, the company's management stated in the December earnings call that "members are becoming increasingly cautious in their spending decisions," and recent U.S. economic data suggests that this trend continues.

The latest inflation expectations released by the University of Michigan for February show that U.S. consumers' 5-year to 10-year inflation expectations have a final value of 3.5%, marking the largest month-on-month increase since May 2021 and the highest level since 1995. U.S. consumers are increasingly worried that Trump's tariff increases will lead to rising prices, and they are even concerned that companies may significantly lay off employees due to inflation and the Federal Reserve's high interest rates, which could lead them to expect substantial cuts in consumer spending, a core driver of the U.S. economy that has remained strong since the Federal Reserve's aggressive rate hike cycle began in 2022