Group 1 - The Federal Reserve maintained the federal funds rate target range at 4.25% to 4.5%, marking the third consecutive pause in rate cuts since the initiation of the easing cycle in September last year [2][3] - The Fed emphasized rising risks of high unemployment and inflation, indicating a cautious approach to future monetary policy adjustments [3][4] - The uncertainty surrounding the economic outlook has increased due to tariff policies, which have led to concerns about inflation and economic slowdown [3][5] Group 2 - The first quarter GDP growth rate for the U.S. was reported at -0.3%, the lowest since Q2 2022, primarily affected by a significant increase in imports and a decrease in government spending [6][7] - The trade deficit reached a historical high of $162 billion in March, with imports rising by 5% to $342.7 billion, marking the fourth consecutive month of record imports [6][7] - Despite the economic slowdown, the labor market remains strong, with non-farm payrolls increasing by 177,000 in April, surpassing expectations [8] Group 3 - The Fed is expected to maintain a wait-and-see approach, with no immediate rate cuts anticipated before the expiration of the 90-day tariff suspension on July 8 [4][9] - The potential for a recession remains, but the labor market's resilience may keep the unemployment rate near neutral targets, focusing Fed policy on inflation [10] - Market attention is on the progress of trade negotiations, which could influence future monetary policy decisions [10][11] Group 4 - The uncertainty from tariff policies has led to increased volatility in the stock market, with major indices experiencing declines year-to-date [11] - The bond market has faced pressure due to concerns over rising inflation and fiscal policy uncertainties, although yields have recently shown signs of retreat [11][12] - Gold investment demand has surged amid global trade tensions and economic recession fears, with a long-term bullish outlook despite potential short-term adjustments [12]

Core Viewpoint - The Federal Reserve's patience in the face of economic uncertainty in the U.S. may be the correct approach, as recent comments from Chairman Powell indicate a cautious stance due to inflation and economic challenges posed by tariffs [1] Group 1: Economic Uncertainty - High inflation and declining economic growth potential are significant concerns, with the Fed facing a dilemma due to Trump's tariff policies [1][2] - The expectation is that the Fed may not lower interest rates significantly this year, with a potential trigger for action being a rise in unemployment above 4.5% [2] Group 2: Economic Growth Potential - The U.S. economy is experiencing a structural decline in growth potential, exacerbated by rising import prices and a decrease in labor supply due to higher deportation rates [4] - Despite a projected slowdown in GDP growth, the unemployment rate remains relatively stable at 4.2%, indicating that economic weakness may not lead to sufficient labor market softness to warrant monetary policy support [4] Group 3: Inflation Concerns - The market is beginning to accept that inflation may exceed the Fed's 2% target for a fifth consecutive year, posing a threat to the Fed's credibility [5] - Short-term inflation expectations have risen significantly, although this is not corroborated by other inflation indicators [5] Group 4: Political Pressures - Trump's attacks on the Fed's independence may influence its decision-making, as the Fed aims to maintain its credibility and avoid perceptions of political pressure [6]

Financial Data and Key Metrics Changes - In July, the U.S. non-farm payrolls increased by 114,000, marking the lowest growth since December 2020, significantly below the expected 175,000 and down from the previous value of 206,000 [2][6] - The unemployment rate surged to 4.3%, exceeding expectations and the previous rate of 4.1%, triggering the Sam Rule which indicates a high probability of recession [2][3][5] Business Line Data and Key Metrics Changes - The increase in unemployment was primarily driven by a rise in temporary layoffs, with temporary job losses increasing by 249,000 to 1.1 million, while the number of permanent job losers remained relatively stable at 1.7 million [7][9] Market Data and Key Metrics Changes - The market reacted negatively to the employment data, with expectations shifting towards a hard landing for the economy, contrasting previous assumptions of a soft landing [2][10] - The Russell 2000 index, representing small-cap stocks, experienced a decline greater than the broader market, indicating a sell-off in small-cap stocks due to their weaker risk and cyclical resilience [16][17] Company Strategy and Development Direction and Industry Competition - The market is increasingly favoring "defensive" stocks, such as consumer staples and utilities, which are considered essential regardless of economic conditions, as investors seek safety amid economic uncertainty [15][16] - The potential for a recession has led to a shift in market sentiment, with expectations for the Federal Reserve to lower interest rates more aggressively than previously anticipated [19][20] Management's Comments on Operating Environment and Future Outlook - Management indicated that the July employment data might reflect a one-time factor due to the impact of Hurricane Barry, which caused temporary layoffs in affected regions [9][10] - There is speculation that the unemployment rate could revert to 4.1% in August, as the July data may not be indicative of a long-term trend [10][12] Other Important Information - The Sam Rule, which suggests that a 0.5 percentage point increase in the three-month average unemployment rate compared to the previous year's low indicates a recession, has been triggered by the recent data [5][6] - The market is pricing in the possibility of a 50 basis point rate cut by the Federal Reserve in the near future, reflecting heightened economic concerns [19][20] Q&A Session Summary Question: Is the July employment data a sign of a recession? - The July employment data, while concerning, may not definitively indicate a recession, but it does increase the probability of one occurring [12] Question: What factors contributed to the rise in unemployment? - The rise in unemployment was largely due to temporary layoffs, influenced by external factors such as Hurricane Barry, which affected many businesses [9][10] Question: How is the market responding to the economic outlook? - The market is shifting towards defensive stocks and pricing in potential interest rate cuts as investors react to the increased likelihood of a recession [15][19]