Recession deal, here it comes!

At the end of last year, wrote an article.

U.S. stocks, why not yet plummet?

The article mentions that whether the stock market or other capital markets, each stage, the market will be trading on a certain theme.

In the U.S. stock market, for example, before the 2020 epidemic, the trade was “recession”, and when the epidemic really broke out, it was trading “epidemic proliferation”, and when the epidemic proliferation became clear, it started trading “vaccine R&D” and “monetary policy remains accommodative”, then, start trading “economic recovery beyond expectations”, and then from the fourth quarter of 2021, the market starts trading “rate hike expectations “……

About the rate hike magnitude and duration of this thing, the market has been trading until October 2022, the market finally basically confirmed that the Fed’s rate hike terminal interest rate is about 5-5.25%, when each time the rate hike 50-75 basis points, rate hike expectations of this theme was interpreted to complete, and then the market entered the “slowdown in interest rate hikes Then the market moved to the “slowdown in rate hikes” theme.

At that time, I thought that after 1 month or so for the interpretation of the slowdown in interest rate hikes, the market may again enter the theme of “recession pricing” trading mode.

Unfortunately, I was the one who was too superficial.

As it turns out, since November 2021 so far, the market has been trading on the theme of “slowdown”, whether it is economic growth, employment or inflation data, the market will be based on the performance of the data, guessing that the Fed slowdown or continue to raise interest rates longer and more ideas, coupled with the Fed officials, but also move out a fart, blow a wind, the stock market will follow a wave of rise or fall……

Observe the past 1.5 years NASDAQ 100 daily closing price can be found, from 2021 quarter so far, whether trading rate hike expectations theme, or trading rate hike slowdown theme, U.S. stocks rise or fall, look at the rise or fall of Treasury yields on –

Treasury yields go up it goes down, Treasury yields go down it goes up, almost without exception.

However, just last night, this “rule” was invalidated.

Market watchers should know that because last night’s weekly jobless claims and jobless claims exceeded expectations.

This means that the U.S. unemployment rate, even if it does not rise in February, then it is bound to lift significantly in March.

This situation means that the Fed is much less likely to raise interest rates by 50 basis points again, so the U.S. 10-year Treasury yield fell straight down from nearly 4% all the way to near 3.87% yesterday, and the U.S. stock market should have soared according to the theme of the previous year and a half of trading.

What happened yesterday instead was that U.S. stocks plunged!

A more important signal is that, in the U.S. stock market plunge at the same time, the past six months, basically with the U.S. stock market, along with the U.S. Treasury yields fluctuations in gold, last night not only did not fall, but began to rise!

Under what circumstances should gold rise?

— Of course it should go up when the economy is in recession!

This is the signal that Treasury yields fell, the stock market plunged, and gold rose, so we can basically confirm that the trading theme of U.S. stocks (and gold), from yesterday, has officially shifted from “rate hike expectations” to “recession pricing”.

 

 

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