The U.S. economy and asset price market appear to be strong, but in fact, continued violent fluctuations in the U.S. financial market may be brewing. The famous value investor Jeremy Grantham pointedly pointed out that the U.S. financial market bubble is comparable to that of 2000, and the worst Under the circumstances, U.S. stocks may plummet 20% from their highs, the U.S. economic recession is imminent, and they warned that huge fluctuations in asset prices will bring great pain to the U.S. financial market.
In response, Morgan Stanley former head of Asia Roach warned in an interview with CNBC on June 28 that the economic phenomenon of economic recession and high inflation experienced by the United States in the 1970s may return, and At this time, the U.S. financial market is not really ready, and the latest market is feedbacking this conclusion.
Revised data released by the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce on June 30 showed that the annualized real GDP of the United States in the first quarter dropped again to a final value of minus 1.6% quarter-on-quarter, which was lower than the second estimate released in May. 0.1 percentage points. The data also showed some signs of weakness the U.S. economy is experiencing, while consumer spending was also revised down, marking the first GDP contraction since a brief deep recession during the coronavirus pandemic nearly two years ago.
Currently, U.S. inflation has reached as high as 8.6% (inflation has exceeded 6% for 7 consecutive months, the previous value was 8.3%), and threatens economic expansion, but this inflation value does not accurately reflect reality, Bernstein Alliance’s Former chief economist Joseph Carson said that if the U.S. Department of Labor still calculated the way it did in the 1980s, the official inflation rate would now be well over 15%, which would cast a huge shadow on the U.S. economy and financial markets. shadow.
The changing trend of major U.S. inflation indicators
IMF President said on June 26 that with the sharp rise in U.S. inflation and the Federal Reserve aggressive interest rate hikes , the United States faces a greater risk of economic recession. Then, on June 30, Federal Reserve Chairman Powell has made his clearest acknowledgment at an event that a sharp increase in interest rates will definitely push the U.S. economy into recession, saying that a soft landing will be very challenging. With inflation expectations falling in June, Wall Street expressed concern about the possibility of a recession. Recession fears are growing.
The Fed chairman faced a barrage of questions about recession risks, with economists increasingly pointing to the possibility of a recession sometime in the next two years. Bloomberg predicts that the probability of recession in the next 24 months is 98.5%, JPMorgan Chase also said that the probability of recession in the United States has soared to 85%.
Now, there is more and more evidence and signals that the United States is about to fall into recession, and there may also be a Great Depression. Michael Novogratz, a legendary Wall Street investor who has worked at Goldman Sachs for 11 years, has given the most direct statement so far. Prediction.
He told the US media MarketWatch a week ago that "the US economy will collapse", which was reflected in the recent negative performance of US stocks, the yield curve, Google and social media search activity for "US recession", recent GDP data, consumption Not-so-encouraging data such as investor and business confidence, poor data on the U.S. housing market, and the current macroeconomic environment have shown.
A quarterly survey of CFOs conducted by Duke University , the Federal Reserve Bank of Richmond and the Federal Reserve Bank of Atlanta shows that more than one-fifth of CFOs believe that U.S. GDP may have negative growth in the next year. The proportion in the previous quarter was 12%. CFOs We generally expect companies to face higher price and cost pressures.
At the same time, in the past few months, while international oil prices have soared, the U.S. dollar index has fluctuated and strengthened and continued to hover at high levels, the 10-year U.S. Treasury bond, which is a textbook anchor of global asset price pricing, has also been suddenly sold off by the market. Currently, the two-year U.S. Treasury bond yield, which reflects U.S. market interest rate expectations, has risen above 2.50%. The yield shows that interest rates are higher than expected. The plunge in U.S. stocks in the past two weeks is the best footnote.
In response to this, Ron Paul, a senior American politician and defender of the Austrian school of economics, once again warned the market in an interview with the US media CNBC on May 25 that the Russia-Ukraine conflict, high inflation, high debt, soaring oil prices, rising interest rates and U.S. debt yields The inversion of the interest rate curve indicates that the U.S. economy is heading toward recession. As the risk of recession increases, coupled with the impact of the Federal Reserve's faster tightening of monetary policy, at least $32 trillion may be withdrawing from the U.S. financial asset market.
According to surveys by several major Wall Street investment banks, the sell-off in the U.S. financial market is expected to intensify. The S&P index may fall by a further 10% until the Federal Reserve ends its hawkish actions. It is worth noting that the sell-off in U.S. stocks has now Continuing into the sixth month, the rebound failed and lingered in the bear market, which was bound to record the largest half-year decline since 1970.
is known as the visionary predator Rogers also pointed out in a recent interview with Singapore media that the United States has not had a very serious financial market crisis since 2008, which requires vigilance because every 4 years in the United States A serious financial problem will occur once in -8 years. The consequence of this is that the U.S. financial market system will be in a state of risk aversion, will become more complex and volatile, and will intensify the volatility of the U.S. financial market.
The information behind this shows that in the context of weak global credit markets, the expectation of US dollar liquidity "turning from flood to drought" has increased (according to the New York Fed 's balance sheet shrinkage roadmap forecast outlined on May 25. , the size of the Federal Reserve's balance sheet is expected to fall from the current nearly 9 trillion US dollars to 5.9 trillion by 2025), the US Libor-OIS spread is also close to the widest level since the financial crisis, and the three-month Libor has refreshed the financial A new high since the height of the crisis (dollar financing costs are higher).
During this process, we saw that the U.S. dollar index fluctuated and strengthened again. The BWC Chinese website research team has reminded many times on different occasions that the U.S. dollar is the major international reserve currency and accounts for more than half of global trade transactions as a settlement currency. Under the market, the United States can transfer its growing debt deficit and inflation risks to some markets with a single economic structure, high foreign debt and shortage of foreign reserves through the loose and tight dollar cycle, collect seigniorage tax , and finance in US dollars. When costs become expensive and liquidity is removed, the stock and bond exchange markets of these economies will continue to be severely affected. This trend will be more significant as the US dollar liquidity will "turn from flood to drought" and is at the bottom.
In this process, a latest report from Bloomberg pointed out that countries such as Sri Lanka, Turkey , Argentina , Chile , Lebanon, Peru , Brazil , Czech , Poland , Pakistan Egypt and Indonesia these 12 countries with relatively fragile economies and financial markets may all face dollar shortages due to high foreign debt and low foreign reserves, and fall into a fragile pattern of severe currency depreciation and sovereign debt crisis . In recent weeks, the sharp decline in Vietnam financial markets means that the attraction effect of this strong US dollar cycle on the market has begun in advance.
According to a report by US media CNBC on June 29, although the "Internet celebrity" Vietnam's stock market doubled last year and performed best in the world, it has recently begun to fall sharply. As of June 26, Vietnam's VN30 index has dropped from The 2022 high has erased the 21.9% increase. Due to strong selling pressure, according to a report by Vietnam Express, many international funds with a keen sense of smell are withdrawing from the Vietnamese market. As of June 20, foreign capital net sales reached 463 Trillion VND securities financial assets were 2.98 times that of the same period last year, and recorded the second worst performance since March 2020 in the week of June 22.
Experts in Vietnam’s securities industry said that Vietnam’s current tightening of financial market conditions, coupled with global risk aversion, poses a threat to high-valued assets represented by Vietnam’s stock market and is prone to forming a domino effect . This downward trend Risks will still dominate the market and become the first market to be hit since the Federal Reserve dropped the financial nuclear bomb.
In a report released a week ago, the IMF predicted that although Vietnam's foreign reserves are growing, its external debt is expanding at a faster rate, and it is also facing increased volatility in global financial conditions, high oil prices, supply chain shortages, tightening policies by the Federal Reserve, real estate and corporate debt markets. The increase in macro risks such as the development of the economy has had a negative impact on many Vietnamese companies. Similarly, Vietnam's economy has once again sounded the alarm for the above 12 fragile countries, because these countries also face the same risks.
Immediately afterwards, Ray Dalio, founder of Bridgewater, the world's largest hedge fund Bridgewater, said in an interview that during a period when U.S. inflation seriously affects the actual returns of risky financial assets, investors are better off choosing physical assets such as real estate and gold. . In addition, he also said that it is impossible for the Fed to achieve the economic goals it hopes for and achieve a "soft landing".
Then consider the possibility that the current US dollar asset price is being sold off in large quantities. As Keynes said, gold serves as a guard of the market and a reserve in times of emergency. There is no other better substitute.
The Libor-OIS interest rate spread is close to the widest level in ten years, which sends us a clear signal: in the era of ultra-low interest rates for borrowing US dollars, which is getting further and further away from Wall Street, the time window for physical goods to be king has expired. At this time, under the triple pressure of liquidity removal, rising inflation and rising U.S. bond yields, it will be beneficial to the stagflation-oriented commodity . (End)
