Bloomberg's front-page headline over the weekend unanimously uses next week's CPI data as an important reference data!
Before the interest rate cut in September, I think the main macro narratives are only two major possibilities: trading interest rate cuts and trading recessions.
Bloomberg's article begins with the recent large volatility of US stocks, and believes that large volatility is also a good investment opportunity.
Seeing this, it is tantamount to aggravating my previous "conspiracy theory" considerations. Large fluctuations attract a large number of speculators to buy, and institutions and capital take the opportunity to flee. This action is also a certain defense measure against the potential risks of the yen.
The second half of this article, of course, also raised many concerns about the current economic situation. There are two concerns:
1. If the CPI data weakens significantly, it may increase the possibility of economic recession under high interest rates. If the CPI unexpectedly accelerates the weakening, the possibility of economic recession will be very large. The impact on US stocks will be very large. According to statistics, the number of 10% bearish hedging contracts for the next 30 days is currently three times the number of 10% bullish hedging contracts. Although the US stock market rebounded later this week, the market has not completely relaxed its vigilance.
2. Long-short interest rate inversion. Long-short interest rate inversion was an important signal in the previous four economic recessions. However, in this long-short interest rate inversion, the capital market, private lending and QE issues have weakened the impact of this interest rate inversion, but this does not mean that the interest rate inversion can be ignored.
I think this view is correct. Looking back at the US subprime mortgage crisis, the initial outbreak of default problems in real estate caused hidden dangers that should have erupted long ago. Because of the joint participation of Wall Street capital and real estate capital, the crisis was extended for 1-2 years. Although the extension of life gave capital and institutional restructuring time to escape, it eventually triggered the US subprime mortgage crisis, which was more dangerous, and even brought about a global economic and financial crisis.
Summary:
For the "conspiracy theory" of capital "escaping" caused by the potential risks of Japanese yen capital mentioned in my previous article this week, I will continue to observe market dynamics to verify. I am personally more worried about such risks. Of course, it is not ruled out that the risks will be suppressed or delayed like last time.
