"Triple Kill in Stocks, Bonds, and Currency"! Is Global Capital Fleeing the US in a Frenzy?

On Thursday, as US stocks plunged again after a surge in the previous trading session, more and more Wall Street traders are beginning to worry whether the rebound in the US stock market on Wednesday after Trump's decision to temporarily suspend tariffs was just a "dead cat bounce."

Meanwhile, at this extremely volatile period, the biggest focus in the US market may still not be on the stock market—because after the collapse of US bonds earlier this week, new pressures seem to be emerging:

Not only is the yield on 30-year US bonds starting to move back towards the 5% mark, but the US dollar has also experienced a rare cliff-like plunge, quickly falling below the 100 mark at the start of Friday's session...

Market data shows that less than 24 hours after US President Trump reversed his decision in his once-in-a-century trade war to prevent a financial market collapse, US stocks, bonds, and the dollar were again frantically sold off on Thursday as fears of a global recession swept Wall Street.

As investors took advantage of Wednesday's historic rebound to sell high, the S&P 500 index closed down 3.5% for the day. The Dow also closed down about 2.5%, with a full-day drop of 1,014.8 points. Specifically, the seven largest tech stocks that rose the most on Wednesday all fell sharply on Thursday: Tesla's stock fell 7.3%, Nvidia's stock fell 5.9%, and Meta Platforms fell 6.7%. Stocks related to economically sensitive companies were also hit hard. The Russell 2000 index, which tracks small-cap stocks, fell 4.3%.

The collapse of long-term bonds sent yields soaring again after a brief respite, and by early Friday in Asia, the yield on 30-year US bonds had risen back to 4.93%, once again moving towards the 5% mark.

The US dollar also fell for the third consecutive day, with the ICE US dollar index falling below the 100 mark early Friday, hitting its lowest level since July 2023 at 99.66. The reason was that traders liquidated US assets and turned to other safe-haven currencies such as the Swiss franc, which saw its largest one-day gain in a decade on Thursday.

Meanwhile, traders flocked to traditional safe assets. In early Friday trading, gold futures surged to a record $3,221 per ounce.

(Gold experiences its largest gain since the pandemic)

Is global capital starting to flee the US?

There is no doubt that despite Trump's "compromise-like" announcement on Wednesday of a 90-day suspension of reciprocal tariffs on dozens of countries, the crisis facing the US financial market seems to have intensified after just one day of relief.

As the well-known financial blog site Zero Hedge mentioned, you only need to take a quick glance at the following three charts to understand why the US market is starting to panic.

① The world's perception of US sovereign risk is rising

The US 1-year sovereign CDS has recently surged sharply, and the rising cost of CDS usually reflects market panic about credit risk, with investors starting to seek hedging mechanisms. Currently, the US CDS trading range is almost as bad as Italy and Greece.

② The unwinding of US bond basis trades is far from over

Swap spreads show that the US dollar funding market, after quickly easing yesterday, is in trouble again...

③ The US dollar is rapidly collapsing

The Bloomberg US dollar index, after falling below the 200-day moving average, has continued to fall uncontrollably.

Renowned economist Peter Schiff said, "I have never seen such a large-scale sell-off of US assets. The dollar, bonds, and stocks have all been hit hard. I don't remember when the US dollar fell 3.5% against the Swiss franc in a single day. The US's journey on the global tailwind is about to come to an abrupt halt. Buckle up."

In fact, since Trump announced plans to impose punitive tariffs on dozens of US trading partners, the recent volatility in US stocks and bonds has been comparable to the pandemic and the 2008 financial crisis, which is enough to illustrate the market's turbulence.

These movements ultimately point to the same alarming conclusion: Trump's chaotic tariff measures, regardless of the final outcome, are rapidly eroding confidence in the US economy and could keep the market on edge for the next three months as traders anxiously wait to see how this will unfold.

Bill Smead, chief investment officer of Smead Capital Management, said, "This will all end soon—the possibility that we will soon return to happy days is very, very low. This could be the beginning of a huge bear market."

This fear reflects a dramatic shift in market sentiment less than three months into Trump's second term—Wall Street had bet that his tax cuts, deregulation, and economic growth policies would continue the stock market bull run. But as Trump fired tens of thousands of employees, withheld federal aid, and unilaterally rewrote international trade rules, these expectations quickly reversed.

More worrying than the tariffs themselves is Trump's decision-making style: policies are intermittent, using unconventional pricing formulas and setting unconventional goals. This makes it difficult for Wall Street analysts to predict the direction of events, let alone assess their ultimate impact on stock, bond, and commodity prices.

Is the world moving away from the US dollar?

Kim Forrest, chief investment officer and founder of Bokeh Capital Partners, said, "Even in emerging markets, we know what their policies are. But in the US, we can no longer perform fundamental analysis on some excellent companies."

Since Trump announced the latest tariffs in the White House Rose Garden, the market has arguably experienced a thrilling past six trading sessions. The initial shock triggered a deep sell-off in US stocks, wiping out more than $10 trillion in market value. Then, from New York to Tokyo, from Sydney to London, the sell-off in US bonds plunged global bond markets into turmoil, and now, the new target of the plunge is the US dollar.

In a new video released on Thursday, Peter Schiff said that Trump's tariffs are not only ineffective but are also backfiring, exacerbating the trade deficit and weakening US competitiveness. He warned, "The world is moving away from the US dollar."

Schiff also emphasized the root cause of the US's persistent trade deficit, highlighting the lack of savings and investment in the US. He believes that excessive domestic spending and insufficient investment have led the US to rely excessively on foreign producers. The US has to rely on overseas factories to produce goods it cannot produce itself.

Although Schiff praised Trump's goal of reducing the budget deficit, he predicted that tariffs would have the opposite effect. "Tariffs not only fail to address the weaknesses of the US economy but also impose additional burdens on US consumers and businesses. These tariffs are paid by Americans, not by US trading partners—there is no external income, everything comes from within. And 'tax increases' on ordinary Americans will further burden an already weak economy. Therefore, the US will face more severe stagflation."

Schiff warned of the fragility of the US financial system, emphasizing the US's reliance on foreign funds to maintain an unsustainable standard of living.

He predicted that this dependence would end in pain, as a devalued US dollar would force Americans to reduce consumption and accept a lower standard of living.

"In fact, the US is taking advantage of the world because we rely on global resources to maintain a lifestyle beyond our means. But the rest of the world can only support our extravagance by compressing their own consumption, and this model is about to change."

Schiff pointed out, "Change must happen because the US dollar will depreciate significantly. At that time, US consumption will shrink, while consumption in other countries will grow. In this way, the trade deficit will disappear as the US standard of living declines. And the world is accelerating the sell-off of the US dollar, which is laying the groundwork for the upcoming major currency devaluation. "