U.S. equities posted five consecutive days of declines, the U.S. dollar weakened, U.S. Treasury yields rebounded, crude oil and gold rose, and tensions between the Federal Reserve and the U.S. Treasury intensified—what is your take on this?

After Bessent stated that he would maintain a strong dollar while promoting global growth to address the debt issue—and affirmed that he would jointly advance fiscal consolidation with the U.S. Office of Management and Budget (OMB)—market participants were left utterly bewildered, unable even to quantify the ensuing confusion. U.S. Treasuries, U.S. equities, gold, the U.S. dollar, crude oil, and U.S. stocks sequentially broke prior logical relationships and began diverging and repricing. After the market close, aided by Bessent’s 'monetary allies'—the Fed’s foreign reverse repurchase facility surged to its highest level since October—the U.S. dollar and U.S. equities clearly suffered the most. Bessent’s strategy of 'using a paper towel to block a debt tsunami' appears instead to have alerted investors to the fact that even the U.S. Treasury Department has tacitly acknowledged its own lack of fiscal discipline—and its inability to resolve the problem unilaterally, requiring coordinated action across the G20 to quell the 'bond-market storm.' Subsequently, Vance’s remarks confirmed for markets that the White House’s vision for resolving the debt issue does not involve shrinking the debt itself, but rather aims to achieve GDP growth faster than debt accumulation—a path demanding broad-based coordination across supply chains and one that proceeds slowly. On the same evening, Fed official Musalem also delivered remarks on behalf of the central bank—but his speech further widened the rift between the Fed and the U.S. Treasury. He emphasized the Fed’s enduring credibility and its independence from fiscal policy, arguing that interest rates should be raised immediately to avoid future uncertainty. This signals that the core contradiction in the U.S. economy is no longer simply 'cut or hike?' Under fiscal intervention, U.S. markets have—in the short term—lost their bearings across both bond and equity markets. This disorientation stems from AI-driven massive debt issuance, Iran’s shift toward proactive confrontation, and the White House’s high-deficit spending needs. What markets truly fear is the dual, rapid expansion of fiscal authorities and AI mega-corporations amid persistently high interest rates and inflation. Currently, long-end U.S. Treasury pricing logic has been firmly established by markets—yet the Treasury Department is attempting to suppress long-end yields via policy tools, while simultaneously failing to rapidly resolve structural issues hindering revenue growth. Markets only observe the Fed’s rapidly ballooning short-term debt, the token scale of forward repo operations, and countercyclical interventions in the USD/JPY exchange rate—revealing not only alarming 'borrow-short, lend-long' dynamics, but also rising costs of sustaining bond-market stability amid Japan’s fragile yen fundamentals. Yet the White House still appears convinced it is presiding over the strongest U.S. economic conditions since 2025—and hopes to sustain a high-velocity macro environment featuring falling short- and long-term rates alongside a persistently strong dollar. Consequently, the entire market has entered a state of pricing chaos: gold exhibits extreme volatility; the dollar swings wildly; short-term price suppression relies increasingly on surprise moves; and even crude oil shows waning ability to cap far-dated prices. In such an environment, every investment decision carries substantial intraday trial-and-error costs. So although markets are always right, when someone forcibly distorts them, fixating solely on price movements may lead you astray—for instance, Citigroup recently advised outright shorting the dollar and going long gold in the near term. But would investors dare add positions at this juncture? My view: anchor your analysis in the underlying contradictions—not just price levels! (1) The U.S. economy is currently exhibiting a classic case of 'policy crossfire.'

On August 19, U.S. equities declined for three consecutive nights, tech stocks broadly fell, commodities diverged—oil prices rose, while gold and copper fell—how do you interpret this?

This is also why semiconductor stocks have exhibited significantly greater volatility recently than energy, healthcare, or utilities sectors. Currently, the SOX Index shows bearish momentum! III. Gold Three years ago, rising geopolitical risks would invariably lift gold prices. But overnight, gold actually declined—spot gold briefly fell to around $4,365 per ounce. In fact, ever since gold surpassed the $4,000 threshold, its pricing has increasingly tracked both U.S. equities and the U.S. dollar—not simple hedging logic alone. Gold now faces multiple, opposing forces—its direction depends entirely on which exerts stronger influence: • Geopolitical risk; • USD strength/weakness; • Rising U.S. Treasury yields; • Rising global real interest rates; • Global fiscal deficits; • Currency credibility; • Oil-driven inflation pressures; • Global rate-hike expectations. In the short term, because gold generates no yield, holding it becomes markedly more costly once 30-year Treasury yields surge above 5.3%. And once equity-market downside expectations solidify, recent market behavior has consistently favored selling gold to raise cash. Thus, gold is currently experiencing a situation where 'rate-driven pressure temporarily outweighs safe-haven demand.' Technically, gold may be trending downward to seek support—whether Asian capital can step in to absorb European outflows remains to be seen. IV. Copper Copper’s logic differs fundamentally from gold’s—it is far more industrially driven. Typically, copper price declines signal market concerns that high interest rates and elevated energy costs will ultimately suppress global real demand—or reflect outright weak demand. Prior to this, copper had undergone a very strong rally—so much so that arbitrage opportunities emerged large enough to justify air-freighting copper from London to New York. Moreover, on August 17, LME copper briefly approached its all-time high of $14,545 per ton—yet market narratives still centered on supply tightness, AI infrastructure demand, and declining inventories. But on the night of the 19th, as copper pulled back, talk of supply constraints instantly vanished—indicating profit-taking by major players and a macro-driven shift in institutional positioning. Additionally, China’s manufacturing fundamentals do not fully support unconditional upside for industrial metals: property-related demand remains subdued, and steel inventories have risen—suggesting industrial consumption is not urgently constrained. Nor has Trump discussed copper tariffs. Thus, copper faces a paradox: long-term supply may tighten, yet near-term macro demand may prove insufficient. This implies copper price volatility may increasingly reflect coordinated speculation among AI-focused mega-corporations. V. From the perspective of 'monetary liquidity' Viewed through equity indices alone, this appears merely a routine correction. Yet placing bonds, gold, and tech stocks side-by-side clarifies the picture considerably: Initially, markets priced in expectations of looser liquidity: Equities bet on falling inflation, the Fed halting hikes, lower funding costs, continued AI/tech expansion, and higher risk-asset valuations. But I warned early on that this logic was flawed—because nearly all major U.S. tech firms are raising capital aggressively, regardless of cost. That doesn’t signal current tightness—it signals anticipation of future costlier money! Now, rate expectations have re-diverged: recent U.S. economic data point to weakness, suggesting short-end rates may fall—but long-end yields are rising, not falling. For six months, the Treasury has lacked the capacity to suppress long-end yields. This means markets should now understand: even if the Fed holds rates steady, long-term funding costs won’t decline!

US Stocks Slip as Oil Prices and Bond Market Pressure Mount

4 days ago

US stocks declined across major indices as surging oil prices and rising Treasury yields weighed on Wall Street. Brent crude jumped nearly 3% to $108.75 amid Middle East tensions, raising inflation fears before a potential Federal Reserve rate decision.

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