The most worth reviewing event this week is that the market suddenly rethought whether “rates will continue to remain high and not come down.” The most obvious change in ETF Radar this week was not a single sector surging or crashing, but that the three threads — weak employment, the yen, and energy — began together to rewrite the market map for the next one to two months.

Key changes this week

• Talk of BOJ/yen normalization has clearly heated up; related events are very dense, and this has pushed the chain of the yen, U.S. Treasuries, and real estate back to the forefront.
• The Fed rate cycle remains the market’s main storyline; the key change is that U.S. nonfarm payrolls were clearly weaker, and the market’s expectation for further rate hikes has fallen.
• The Russia-Ukraine conflict is still driving oil prices and defense sentiment; although it was not the strongest this week, it should not be ignored.
• U.S.-Iran tensions remain high, so energy supply risk has not completely exited.
• Chinese financial regulatory news continues to be frequent, directly affecting China-concept internet stocks, the Taiwan tech supply chain, and certain capital flows.
• The most notable direction reversals were: IEF, VGIT, FXY, VTI, EWT, KWEB, PFF shifted toward positive; IWM shifted toward negative.
• The most notable new actionable theme this week is KWEB; VDE, TLT, VNQ, IEF have also moved from earlier stages to clearer tracking stages.
• Confidence clearly weakened for XOP, EEM, LIT, XLP; among them XOP is still somewhat positive, but the evidence is clearly less concentrated than it was earlier.

This week’s main story 1

When weak employment appeared, rate expectations flipped

The biggest market-moving news this week was U.S. nonfarm payrolls coming in clearly below expectations — and much colder than expected. In plain terms, the heat of U.S. hiring and job-seeking looks cooler than before. The market then began to lower its view on whether the Fed will continue to stay tight, i.e., the expected future path of rates moved in a milder direction.

Why does this affect ETFs? Because interest rates are the market’s foundation. If the foundation eases a bit, bonds breathe easier and assets that rely on borrowing and valuation also feel better; on the other hand, small-cap stocks that already have weak funding and position levels may not be saved merely by a small rate loosening.

Start with IEF. Last week IEF actually rose 0.24%. ETF Radar’s view for IEF over the next 1 to 3 months is tilted positive, with fairly consistent signals. The logic here isn’t just one nonfarm number but several pieces of evidence pointing the same way: first, nonfarm payrolls fell by 23,000, clearly weaker than expected; second, the market-implied federal funds path shifted down to about 3.63%, meaning the market is betting future policy rates will be lower; third, the last three U.S. Treasury auctions showed relatively strong demand, with a bid-to-cover ratio of about 2.84 — put simply, there were a fair number of buyers. One more note: IEF has fallen 0.49% in the past 1 month, which indicates that the price over the past month is still tussling with the system’s assessment — a “past 1-month tape persistent divergence” — but the magnitude is not large, so continue to monitor.

Now look at VGIT. Last week VGIT actually rose 0.12%. ETF Radar’s model is tilted positive on VGIT for the outlook, with fairly focused evidence. VGIT is also a medium-term Treasury fund, much like IEF, and it benefits from a “rate-expectations downgrade.” Supporting reads include: weak nonfarm payrolls, a lower policy path, and front-end policy expectations turning more dovish. A reminder: CFTC net shorts in 5-year Treasury futures are large, about -2,200,000 contracts; CFTC positions show how big players are lining up in futures. In other words, fundamentals point to bullishness, but there are still positions on the other side, so although the view is tilted positive, the process may not be smooth.

Now look at PFF. Last week PFF actually rose 0.56%. Looking forward, the data point to PFF being somewhat positive, but the signal is average. PFF is preferred stock — put simply, it sits between bonds and equities and is sensitive to both rates and credit conditions. This week it flipped from slightly negative to slightly positive mainly because the pressure from continued rate hikes and a rapid long-end rate surge eased somewhat; at the same time, high-yield spreads are narrowing. A spread is how much more interest a risk asset pays over Treasuries; a narrowing spread usually means the market is less worried about defaults. However, assets like PFF are less elastic than growth stocks, so although the signal has turned better, it’s not particularly sharp.

Within this main thread, we should also talk about the divergence in the stock market. VTI actually rose 3.69% last week. ETF Radar views VTI as moderately to somewhat bullish over the next 1 to 3 months, with signals ranging from neutral-to-positive to moderately strong. The rationale is a gentler interest-rate path, which usually helps the overall stock market; plus, yen-related passive selling pressure is likely to ease, which also supported U.S. equities. Over the past 1 month VTI also rose 2.44%, which counts as the tape validating the system's view.

But IWM is different. IWM actually rose 3.56% last week. ETF Radar's model is moderately bearish on IWM for the next 1 to 3 months, with fairly consistent signals. Here we see a clear divergence: prices rose last week, but the model sees weakness over the next month or two. The reason is not the price itself, but funding and positioning. COT, i.e., the Commitments of Traders report, shows Russell 2000 net shorts deepened to about -85145 contracts; coupled with continued net outflows, creations/redemptions over the past 30 days amount to about -1.7% of assets under management. In plain terms, the market bounced in the short term, but big money hasn't genuinely rotated back in. The model focuses on valuation and funding pressure over the next 1 to 3 months; last week's prices have not fully reflected that pressure.

This is the most important inflection this week: not all assets benefit together — 'more friendly rates' initially supported bonds and large caps, but it did not automatically resolve the preexisting issues in small caps.

This Week's Main Story 2

The yen thread starts affecting U.S. Treasuries and real estate

The second main thread this week is BOJ normalization and the yen's movement. Simply put, if Japan wants to stabilize the yen, outsiders are guessing whether Japan will be forced to sell some overseas assets to obtain liquidity; if the U.S. or others provide dollar tools, Japan may be less pressured to sell U.S. Treasuries. It sounds convoluted, but the transmission chain is straightforward: whether the yen stabilizes could affect who ends up selling U.S. Treasuries; changes in U.S. Treasury supply pressure will then affect rates and real estate.

First look at FXY. FXY actually rose 1.01% last week. ETF Radar views FXY as moderately bullish over the next 1 to 3 months, with fairly consistent signals. FXY corresponds to the yen. Supporting evidence includes: one, weaker U.S. nonfarm payrolls, which weaken the case for further dollar strength; two, CFTC positioning shows some short covering by speculators. Short covering — that is, those who were betting on a decline buying back to close — helps push the price up. Over the past 1 month FXY also rose 2.64%, indicating the tape is cooperating with this view.

Now look at IEF. IEF actually rose 0.24% last week. ETF Radar's model is moderately bullish on IEF for the next 1 to 3 months, with fairly consistent signals. Its link to the yen is not because IEF has Japanese revenue, but due to supply-side logic: if Japan is not forced to sell more Treasuries, intermediate rates are more likely to move down, which benefits mid-duration U.S. Treasury funds like IEF. One cross-check: over the past 1 month IEF still fell 0.49%, showing that while the market began to accept this logic this week, it had not fully shifted over the past month.

Now look at VNQ. VNQ actually fell 0.53% last week. ETF Radar currently holds a mixed view on VNQ for the next 1 to 3 months, with neutral signals. A mixed view means there are both bullish and bearish pieces of evidence. The bullish case is that if the yen chain ultimately eases U.S. Treasury supply shocks, rate pressure would ease and real estate could catch a break; the bearish case is that the market has not fully confirmed whether this chain will work smoothly. VNQ rose 1.14% over the past 1 month, indicating prices haven't collapsed but neither have they been particularly strong. In plain terms, real estate is not in a 'bad-news-lands-and-immediately-takes-off' mode; it's in a 'don't jump to conclusions yet' stage.

Under the same logic, IYR is also worth mentioning. IYR actually fell 0.38% last week. ETF Radar's model is moderately bullish on IYR for the next 1 to 3 months, but the signals are neutral. IYR is U.S. real estate equities and has a more direct relationship with rates. Its support mainly comes from European wage and inflation pressures not spiraling further out of control, which reduces the probability of major central banks collectively becoming more hawkish. 'More hawkish' in plain terms means being more willing to clamp down on the economy and keep rates higher. Over the past 1 month IYR rose 1.33%, which offers some validation, but the strength is modest.

The core of this thread is not to immediately conclude that "real estate is turning bullish", but that this week the market, for the first time in a while, seriously put back on the table the question "what if Japan doesn't sell so many U.S. Treasuries". For ordinary investors, this will affect the relative performance of rate-sensitive sectors such as bonds, real estate, and banks.

This Week's Main Story 3

Energy Pulls Back Short-term, But Mid-term Thesis Intact

The third thread is about energy. This week oil-related ETFs didn't look great intraday, but the mid-term judgment has not collectively turned bearish. Put bluntly, the market seems to be taking short-term profits, which does not mean the main supply-driven logic is gone.

Start with VDE. Last week VDE actually fell 3.33%. ETF Radar is mildly to strongly positive on VDE for the next 1 to 3 months. This is a typical divergence: it fell last week, but the model is still net-positive. The reason is that the OPEC+ quotas and supply tightening logic remain, and the commodity term structure still shows backwardation. To put it simply, front-month oil is more expensive than later months, which usually indicates current supply is tighter. VDE has still risen 4.42% over the past 1 month, indicating that beyond the short-term pullback, the monthly trend is still validating the mid-term view.

Look at BNO next. Last week BNO actually fell 6.85%. ETF Radar's model is positive on BNO going forward, with fairly consistent signals. BNO is more sensitive to Brent crude. Its support comes from both the Russia-Ukraine situation and the Middle East, both of which continue to add uncertainty to global energy supply. The role of geopolitical risk is simple: transport, output, sanctions — if any link breaks down, oil easily carries a risk premium. A risk premium, in plain terms, is "charging extra for uncertainty." Although it fell quite a bit last week, BNO is still up 11.34% over the past 1 month, which suggests the weekly pullback looks more like short-term noise rather than a one-month level trend reversal.

Within the energy sector this week, what actually weakened were more upstream-elastic names like XOP. It's not that the direction has completely reversed, but the evidence isn't as concentrated as before, and flows and event freshness are declining. So this thesis remains, but it has fallen from "hottest" to "still worth following."

Next Week: Watchlist

• First, watch data updates in ETF Radar related to the Fed cycle; the focus is not a single headline but whether the market continues to downgrade the probability of further rate hikes.
• Then monitor the BOJ/yen normalization thread for any additional evidence of dollar liquidity support, intervention tools, or relief in forced bond-sale pressures.
• Also watch whether news around OPEC+, Russia-Ukraine, and US-Iran continues to raise supply concerns; if event intensity fades, short-term energy volatility could increase.

This week's main theme can be distilled into one sentence: weaker employment slightly loosened rate expectations, the yen reconnected U.S. Treasuries with real estate, and energy pulled back short-term but the mid-term story is not over. Reminder: the above are directional forecasts for the general market from a systematic quantitative model and do not constitute personal investment advice; consult a licensed investment advisor before investing.