Shanghai Composite Index
Dow Jones
October 21 (Last Friday)U.S. stock Dow Jones rose 2.47%, A shares fell 0.13% on the same day
October 24 (This Monday) US stock Dow Jones rose 1.34%, A shares fell 2.02% on the same day
Why did the A shares move completely differently from US stocks in the past few days? It can be said that it is a world of ice and fire? The reason is very simple. In fact, you can look at the trend of the US dollar/RMB (left) during this period and it will be clear that the RMB has depreciated against the US dollar again.
USD/RMB (without)
USD continues to rise, and the RMB falls, causing international assets to withdraw from A-shares from the domestic market. The withdrawal of the US dollar and the decrease in the market circulation of the US dollar will cause further rise in the US dollar to attract assets to purchase the US dollar to form a siphon effect cycle of assets. The withdrawal of capital from A-shares will cause a sharp drop in A-shares to further force the remaining funds to withdraw, which is a stampede of funds.
However, the rise of US stocks in the past few days, A-shares are falling because of this reason. The same is true for the overall decline of A-shares this year. Since March this year, the United States has started hiking interest rates in in order to reduce inflation, and has begun the journey of the US dollar rising. Look at the figure below, which shows the situation of the U.S. Fed rate hike this year and the trend of the US dollar index since the beginning of this year:
Fed rate resolution report
US dollar index
From these two figures, we can see that the U.S. dollar index has been rising this year, and the reason that supports the U.S. Federal Reserve's interest rate hike policy! The Federal Reserve's large-scale interest rate hike policy will cause funds to flow back to the United States, reduce the US dollar circulation in other countries, and reduce the US dollar circulation in the market, causing the US dollar to rise in the country and the US dollar to rise, causing more capital to exchange for US dollars, and even a run may occur!
For example, the economic systems of some small countries are not large enough, and the amount of US dollars reserved is not large. The domestic circulating capital is used to convert US dollars. If the amount of US dollars is not large enough, will the US dollar rise sharply and the country's currency fall sharply? Are the prices of imported products in the country soaring due to changes in the exchange rate ? Africa's fundamental US dollar productivity is a fundamental source of imports. Is it because prices soaring? In order to prevent your own money from depreciating, do you need to buy US dollars to maintain your value? If the US dollar reserves are insufficient, the bank will have no US dollars to exchange! You can check the exchange rates of some countries in recent years and you will know how miserable these countries are. No US dollars can be exchanged, which will also lead to higher-priced US dollars exchange in places like underground banks in the country. Of course, China has enough US dollar reserves, so there will be no problem with the RMB against the US dollar!
The inflation rate in the United States has not yet dropped, and the Federal Reserve's interest rate hike has not ended. It is expected that the US interest rate hike target is 5%, so the rise of the US dollar in the middle may not end. In the meantime, there will be continuous circulating assets being exchanged back to the US dollar and returning to the United States, which will continue to cause domestic capital to leave outside the country except the United States, causing currency to fall sharply, and stock markets to fall sharply.
When the interest rate in the United States really reaches 5%, except for other countries in the United States, the stock market has plummeted and assets have shrunk. The United States can take advantage of to save the market. Capital can then acquire low-priced and high-quality assets around the world with a large amount of US dollars! Is this routine very familiar?
So, you don’t have to worry now. Investing needs to be more cautious. This year may be 2013, and 2014 was the lowest price in the stock market, but 2015 was a bull market. What everyone needs to do now is to save cash, or make some low-risk investments that can be cashed out at any time. When the market is in place, you can enter the market at any time to seize the biggest opportunity!
This wave of opportunity may also be the only wave of era bonus that we born in the 1990s can seize the opportunity in recent decades!
