June 2025 Market Memo

Performance:

Please contact us to inquire about our performance.

June Investment Summary:

In June, we maintained a cautious stance. At the beginning of the month, we rotated into U.S. Treasuries while engaging in a few short-term trades. Overall, we followed through on the expectations and trading plan we outlined last month—fully entering a defensive phase and preserving gains already achieved.

Market Overview, Analysis, and Outlook:

Macro Environment

The One Big Beautiful Bill Act passed, while the effects of deregulation and foreign conflicts are gradually fading. Our view of the U.S. market remains unchanged—we continue to approach it with patience and respect. However, several important factors are being overlooked by many investors:

1. Sustained Weakness in the U.S. Dollar
   The weakening of the U.S. dollar is significantly reducing its influence on U.S. assets. This is a long-term and serious factor. While our trading logic and strategy will not change dramatically in response to dollar weakness, we will closely monitor it to anticipate market risk early.

2. Persistently High U.S. Treasury Yields
   The 10-year Treasury yield continues to hover between 4.2% and 4.5%. Without a notable decline in yields, current U.S. equity valuations lack any long-term appeal.

3. High Uncertainty from Trade Friction and Geopolitical Tensions
   Starting in July, tariff issues will resurface, and other geopolitical tensions continue to disrupt the market.

Capital Flows and Market Behavior:

1. According to a Goldman Sachs research report, the severe market volatility in April left many institutions—especially mutual funds—with very light positioning. The sharp rebound that followed caused many of these funds to underperform the index. This underperformance has led to anxiety among both investors and institutional managers, prompting them to re-enter the market. This has been a key driver behind the continued rise in the indices this month.

2. Market sentiment is now euphoric, with trending names such as CRCL, COIN, CRWV, and AMD being cyclically chased by speculative capital. Trading activity is feverish, but there is a clear lack of patience in holding positions. Short-term trading dominates, while long-term, stable capital inflows are insufficient.

3. Heading into July, major buying forces like stock buybacks are weakening, and we already saw signs of capital outflow at the end of June.

4. At current equity valuations, fundamentally driven institutions are finding it difficult to identify attractive long-term buying opportunities.

U.S. Stock Market Outlook

We remain bearish on the U.S. stock market in the medium term. While short-term news may continue to boost sentiment, the lack of long-term capital support and excessive short-term speculation are red flags. The market is not only lacking depth but is flooded with speculative flows. At the same time, many institutions and individual investors, concerned about underperformance and gripped by FOMO (fear of missing out), are rushing in to chase returns—this often signals heightened risk.

You can never fully rule out the market’s ability to push higher, but considering the multiple factors mentioned above, the current risks are too significant to ignore.

Future Outlook and Strategy:

Based on sentiment and macro analysis, we fully shifted into defense starting in June, aiming to preserve profits from the strong performance in April and May. Entering July, we will not change our pace, views, or trading strategy just because the market is strong or hotspots are abundant. We will continue to approach the market with a defensive stance, watch patiently, and wait for the next high-conviction opportunity.

Whether the market undergoes a wide-ranging sideways move (time correction) or a sharp pullback (price correction), we have contingency strategies for both. We will not be influenced by index performance or peer pressure from other institutions.

We hope our investors will remain patient with us.

Risk Management and Dual Response Strategy:

In response to market conditions, we’ve implemented a dual-layer strategy:

1. Significantly increased cash holdings, while lowering trading frequency and shortening trade cycles.

2. Using derivatives strategies in small sizes to hedge against volatility.

3. Avoiding pair trades or traditional hedging, while maintaining a large cash buffer and modest Treasury exposure. When short-term trading opportunities arise, we will act with small, tactical derivative positions.

Wei Cheng
CEO and Chief Investment Officer

Tranquil Tide Wealth

Written on June 30, 2025