特朗普還能 “折騰” 出美股的新高嗎？

Hello everyone, I am Dolphin Research!

Recently, the ever-active Trump continues to stir the market: from the dramatic "Beautiful Big Bill," to Trump's threats against the EU and Apple, to the Sino-US leaders' call and G2 negotiations in the UK, and even the globally sensational Trump vs. Musk showdown—it's a wave of "man-made" volatility, one after another.

However, after the Sino-US Geneva Agreement on May 12, the risk of a trade freeze between China and the US was lifted, and US stocks saw a clear recovery. But after rebounding to the highs before Trump took office, further breakthroughs became increasingly difficult.

The next question is: Can US stocks break new highs? What should the investment strategy be for the coming period? Dolphin Research will focus on this issue in this article.

1. Has the Sino-US Summit Reached the Peak of Positive News?

US stocks, which have been leading globally, whether the S&P or Nasdaq, have seen zero returns since 2025, essentially using EPS to digest the unrealistic valuation surge before Trump took office.

Trump's policies have evolved as follows:

1) Long-term Tariff Negotiation Battles: From policy drafting to negotiations, decision-making power has gradually shifted from extreme conservatives like Peter Navarro to pragmatists and Wall Street-friendly figures like Bessent. Tariffs, initially aggressive, have now become more of a bargaining chip.

This has led to trading strategies shifting toward "Trump Always Chickens Out" (TACO). The market impact of tariff negotiations is also diminishing.

This week, China and the US held their first trade talks in the UK, which may provide short-term positive stimulus, especially regarding the potential removal of the 20% fentanyl tariff (the justification for this tariff is weak, as it targets legal goods while fentanyl enters illegally). If resolved, it would benefit Chinese stocks more.

However, the market now fully realizes that tariff negotiations are a long-term game, unlikely to be resolved in one or two meetings. Good news one day, bad news the next—this back-and-forth is normal.

2) Failed Domestic Reforms: Whether it's the constitutional power struggle reflected in the US Court of International Trade challenging Trump's tariff legality or the Trump-Musk fallout, it shows Trump's so-called "deep state" reforms have effectively failed. Increasing federal power is no easy task under the entrenched system of checks and balances.

3) Uncertainty Around Domestic Tax Cuts: The "Beautiful Big Bill" is likely to pass, but the Trump-Musk fallout adds uncertainty to its implementation.

After the bill passes, the focus should shift to its fiscal requirements and potential market impacts. Dolphin Research will look beyond the short term to assess the bill's fiscal demands and its effects on US stocks.

2. Is the US Treasury Running Out of Money Again?

The US Treasury's TGA account, used for federal payments, dropped below $300 billion in March 2023 under Yellen. After the debt ceiling was temporarily resolved, Yellen issued bonds aggressively, spiking Treasury yields.

By early June, the TGA account was below $400 billion again. The baseline for normal fiscal operations is around $800 billion, meaning urgent financing is needed.

In 2025, the debt ceiling issue resurfaces: The Treasury estimates the "X-date" (when funds run out) will be in August. A budget reconciliation bill must pass before then to avoid technical default. Trump aims for July 4, so the window is July-August.

Historically, such bills raise the debt ceiling and are inherently stimulative. Passing one could push Treasury yields and term premiums higher.

If passed in July-August, the Treasury will likely issue bonds aggressively. The 2023 debt ceiling crisis showed that after a temporary resolution in June, Yellen's Treasury issued bonds frantically, draining bank liquidity and triggering a stock correction.

Back then, Yellen favored short-term bonds, and post-pandemic excess liquidity (seen in high Fed reverse repo balances) could absorb them.

But this time, the market is different:

a. Short-term funds—no excess reverse repo balances to cushion Treasury issuance; b. Current Treasury Secretary Bessent prefers long-term bonds.

Thus, once the debt ceiling is resolved, there will likely be 1-3 months of massive long-term bond sales.

This will raise issuance costs, making Powell's rate policy crucial.

With tariffs unclear and soft data (consumer sentiment) pointing to recession while hard data (jobs, JOLTS, wages) remains strong, Powell is unlikely to cut rates without worsening hard data.

Massive bond sales will drain dollar liquidity, push yields higher, and likely trigger a stock pullback. After the correction, fiscal stimulus could boost economic recovery and corporate fundamentals.

Combining short-term trends and the July-August outlook, if US stocks rally on Sino-US talks, it may be time to lock in profits. Until July-August, US stocks may continue their lackluster 2025 trend.

After bond sales, stocks could correct again. Without rate cuts or AI breakthroughs, outperforming in US stocks will be tough. Dolphin Research maintains its call for diversified assets over USD-denominated ones.

3. Portfolio Performance

Last week, Alpha Dolphin's virtual portfolio was unchanged, gaining 1.5%, matching the S&P 500, beating the CSI 300 (+0.9%), but lagging MSCI China (+2.4%) and Hang Seng Tech (+2.2%).