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US stocks fluctuate sharply, Bitcoin pulls back 15%, and the interest rate cut expectations for September may be overly aggressive.
The US stock market experienced its biggest fluctuation since 2019.
Over the past week, although the US stock market remained flat overall, it experienced significant fluctuations. On Monday, there was a panic sell-off, followed by substantial market volatility in the following days. Nevertheless, the adjustment was not particularly large, retreating about 8% from its all-time high, and it is still 12% higher than at the beginning of the year.
The stock market and the cryptocurrency market exhibit a high degree of correlation. The focus of the market is on the risks of a U.S. economic recession and the unwinding of yen carry trades. However, in reality, the duration of true panic is quite short. There has not been a typical crisis period where all assets are sold off.
Currently, the overall performance of the US economic data is good, and corporate earnings growth is also decent. As for Japan, the possibility of continued interest rate hikes is low. The large drop on Monday was more due to unexpected factors and forced liquidation of high-leverage positions.
However, market sentiment still needs further observation. The disappointment in technology stocks has deepened. Unless leading companies like Nvidia can exceed expectations again, technology stocks may find it difficult to significantly outperform in the short term.
Analysis of Interest Rate Cut Expectations in September
Currently, the market expects the Federal Reserve to cut interest rates by 25 to 38 basis points in September, with an overall reduction of about 100 basis points for the year. However, this expectation may be too aggressive and requires a continued deterioration of the labor market to support it.
In the short term, the interest rate market may show a fluctuation pattern. However, in the medium to long term, the interest rate cut cycle will eventually begin, and the market is still in a buy-the-dip mode.
Cryptocurrency Market Analysis
Bitcoin has experienced its sharpest pullback since the FTX incident, with a decline of more than 15% at one point. However, this adjustment is mainly influenced by traditional financial markets and not due to issues within the cryptocurrency itself. The technical indicators are severely oversold, similar to the situation on August 16 last year.
Institutional investors remain relatively optimistic about cryptocurrencies, mainly based on the following points:
Funds and Position Analysis
Although the recent stock allocation has decreased, the current allocation ratio of 46.5% is still significantly higher than the average level since 2015. To return to the historical average, stock prices need to drop by about 8%.
Investors' cash holdings are at extremely low levels, which may increase market vulnerability. Bond allocations have noticeably increased, reflecting a rise in risk aversion.
Retail investors reacted relatively mildly, with no large-scale withdrawals. Nikkei futures and long positions in the yen have been significantly reduced.
The total scale of "Yen Arbitrage Trading" is estimated to be around 4 trillion USD, mainly including:
![Cycle Capital Macro Weekly Report (8.12): US Stock "Recession Trade" Overdone, Mainstream Cryptocurrencies Misjudged])https://img-cdn.gateio.im/webp-social/moments-29f33108b42bd5b963c79cddb2730ecd.webp(
Upcoming Key Events
These events may have a significant impact on the market and should be closely monitored.
![Cycle Capital Macro Weekly Report (8.12): Excessive "Recession Trade" in US Stocks, Mainstream Cryptocurrencies Wrongly Killed])https://img-cdn.gateio.im/webp-social/moments-d8e684b139019239cb7a6d726178b5a0.webp(
*Assuming the small account is replying to this content*
According to the White Paper, this round of pullback is without a doubt. The only surprising thing is that so many newcomers are still caught in the confusion of rise and fall... Clearly, they have not understood Satoshi Nakamoto's original intention in the design.