Dollars Worthless, US Stocks Plunge, Trillions Exit

Affected by the expectation that the United States will not cut interest rates in the short term, the global financial market has undergone a sudden change.

Various major asset prices in Asia, except for China, have fallen.

The main stock indexes in the U.S. have suffered the largest decline since September 2023.

The Dow Jones Industrial Average has dropped from around 40,000 points to around 37,600 points.

Due to the increased geopolitical risks, the selling trend continues, and trillions of dollars have withdrawn from the U.S. market.

Therefore, it is highly likely that the U.S. stock market will experience a correction.

Elon Musk, the founder of Tesla, even stated that the U.S. dollar will be worthless in the future.

In contrast, Chinese assets have bottomed out and rebounded.

Does this mean that a new global financial landscape is opening up?

Why has the U.S. stock market continued to plummet?

On May 4th, Buffett announced a series of his operational data.

Although he has been bullish on the U.S., he has significantly reduced his holdings in Apple stocks, and his cash reserves have reached a historical high.

This is just a microcosm of the U.S. entering a deep decline in the next step, but I think this can almost represent everything.

After all, Buffett's approach rarely makes mistakes.

Although Buffett also said that U.S. bonds have no problem and he only invests in the U.S., he does not understand other places, but his latest holdings can reflect the cunning of this 94-year-old man.

So, why do I say that the U.S. stock market will enter a deep correction?

And why will Chinese assets make a comeback?

In addition to the reasons that the U.S. may continue to raise interest rates, inflation constrains the economy, and the AI bubble is too large, what else is there?

The Dow Jones Index has doubled from 18,213 points in 2020 to the current 38,675 points, and the accumulated risk itself is quite large.

In addition, according to data from the Federal Reserve, as of the end of 2023, corporate and local government employee pension funds hold about $9 trillion in U.S. stock assets.

Recently, large pension funds have withdrawn nearly $100 billion from the market and turned to bonds and private equity.

Foreigners have started to bottom out other countries' assets, including Asian currencies and the Chinese stock market, etc.

Recently, the continuous increase in the northward capital in A shares itself can explain a certain problem.

In addition, the fund management is re-examining the relationship between stock market risk and return, and adjusting investment strategies.

Fund managers can obtain about 5% of stable returns through risk-free investments without taking additional risks.

Secondly, Fed's main figure Williams emphasized that if the data shows that the U.S. needs to raise interest rates to achieve policy goals, the Fed will take action without hesitation.

His remarks are more hawkish than his recent statements.

In contrast, Powell's interest rate cut tone this week has had little impact on the market.

Bostic also said that the Fed can be patient, and the possibility of a rate cut before the end of the year is not great.

These hawkish views have caused market panic, and the 10-year U.S. bond yield is expected to rise to 5%.

The current market situation is relatively tense, and the yield breaking through the key level of 4.75% may trigger a large-scale sell-off, pushing interest rates to the historical high of 5% in 2007.

Finally, the collapse of the interest rate cut expectation has led to the investment selling off U.S. stocks.

However, as new data shows that the U.S. economy continues to grow, traders have postponed their expectations for the Fed's easing cycle.

It is expected that the interest rate cut will start in September, which is delayed from the previous expectation of June, and it is still uncertain whether there will be a second interest rate cut in the whole year.

This change has completely overturned the expectation of at least three interest rate cuts within the year at the beginning of the year, leading to a sharp decline in the U.S. stock market and the Nikkei index, and the strong U.S. dollar has returned again.

In addition, investors' concerns about the situation in the Middle East still exist.

Once the crisis between Iran and Israel escalates, it will inevitably lead to a continued surge in oil and gold prices.

That will undoubtedly have a huge impact on the global economy and financial system.

In the case of the U.S. inflation continuing to rise, the U.S. may continue to raise interest rates in advance.

The problem the U.S. is facing now is that raising interest rates will die, but not raising interest rates may be even worse, and it is definitely a dilemma.

So, this series of factors has caused the U.S. stock market to plummet and the U.S. interest rate hike to be indecisive.

Of course, this is more conducive to making Chinese assets more stable.

Chinese assets are favored from the recent sharp rebound in the renminbi exchange rate, A shares continue to refresh the recent new high and a series of news, the impact of the U.S. interest rate hike on China has been minimal.

For example, as of April 30, the net purchase of Chinese assets by the northward capital was 94.1 billion yuan, exceeding the whole year of 2023.

The Hong Kong stock market also ushered in a big rise.

Since the 22nd, the Hang Seng Index has risen by more than 13%, just the opposite of the U.S. stock market.

The hedge fund Bridgewater has put all its money into the Chinese stock and bond markets, just to make money by seizing the opportunity.

Their first-quarter return rate was actually 6.4%, far exceeding many of our investment institutions.

The boss of this Bridgewater Fund is called Dalio.

He has publicly said before that Chinese asset prices are quite cheap, so he actually pays more attention to the scale of investment rather than the direction.

There is another foreign bank asset management big crocodile, Ashmore.

They are now adjusting their investment strategy, reducing their investment in the Indian stock market, and instead taking China as their new favorite.

In their emerging market stock fund, China's share has reached 26%, 14 percentage points higher than India.

Moreover, foreigners have also started to look good at China's economic prospects and have raised China's economic growth rate.

The current international society, the Japanese yen has plummeted, and the Nikkei index is building a top at a high level.

The Russia-Ukraine crisis has caused the whole of Europe to be in turmoil.

The U.S. is now constantly provoking, and no one can guarantee what will happen next.

Europe becoming a ruin is also possible.

Then looking at the whole world, the only region with strong growth momentum and safety is the emerging market represented by China.

Some people will ask, why is India not included?

Because India's assets, like Japan, are at a high level.

Not long ago, the Nikkei and the Indian stock market kept hitting new highs, but now the top shape of the two is very obvious.

Coupled with the fact that China's real estate has completely bottomed out, and the safety of banks has been further improved, future housing prices will remain within a certain range.

However, some of the funds that were originally absorbed by real estate will still slowly withdraw and need a new sponge.

This sponge is undoubtedly China's other assets.

In addition, although the U.S. stock market has fallen, Chinese companies listed in the U.S. have soared.

During the May Day period, the NASDAQ China Dragon Index has continued to rise by more than 10%.

Goldman Sachs also said in the latest capital report that China's transactions have returned.

So why have Chinese assets risen?

To a large extent, it is the opposite of the reasons for the decline in the U.S. stock market.

Another important reason is that capital has underestimated Chinese assets.

However, underestimation is not terrible.

Once capital realizes its mistake, it will correct the value.

Now is the time for Chinese assets to explode.

Look at Buffett, and then look at these Wall Street capitals.

You will understand that they have been cooperating with the Fed's interest rate hike policy, shorting or shorting China.

Now they have also reached a consensus, that is, China can't be cut, and it's not too late to come in now when Chinese assets are wrongly killed.

This also means that the Sino-American financial war has entered a new stage.

China's defensive phase has come to an end, and the U.S. has not gained much advantage.

China has finally broken the myth of the dollar harvest.

In this back and forth confrontation, China will slowly rise.

The trend of a multipolar world is unstoppable, and the era of one superpower and many strong countries is about to pass.