Since the outbreak, the United States has implemented an unprecedented loose monetary policy, the global interest rate level has dropped to a historical low, the US dollar liquidity has changed from a severe shortage to an extremely abundant, and financial asset prices have repeatedly hit new highs. Recently, with the recovery of the US economy, inflation has accelerated. For example, The US securities trading volume has been setting records since last year's money printing, with the highest monthly trading record reaching 13 trillion US dollars, and the average trading volume reaching 9 trillion. U.S. dollar, well above its pre-pandemic average.
Data source: Communication data
In terms of stocks, the current average daily turnover of US stock market can reach 400 billion US dollars, resulting in Dow PE closed at 29.19 times, at 97.90% historical quantile, Nasdaq PE closed at 49.23 times, in At 82.40% historical quantile, S&P 500 PE closed at 32.57 times, and is currently at 96.50% historical quantile . Although it is below the warning line, it cannot be ruled out that it will continue to rise and cause a chain crisis.
Although from the perspective of the financial market, the U.S. market seems to be in a normal operating range, but from a macroeconomic perspective, U.S. inflation has repeatedly exceeded the Fed’s expectations, and risk spillovers have become increasingly prominent. We cannot rely on the Fed’s strong policy control. , after all, like the subprime mortgage crisis in 2008, the FED can only be an afterthought.
At present, the biggest problem in the United States is the debt , The debt ceiling crisis at the end of July has not been resolved, and if the US monetary policy changes, in the context of the tightening of its domestic financing environment, overseas financing facing peak payment, and rising financing costs, etc. , some weaker corporate capital chains will face greater pressure, and even lead to the rupture of the entire chain and a systemic debt crisis.
Data source: Wind
Debt → Money Printing → Securities Crash → What Happens?
As we all know, in 2008, the risk of subprime mortgages in the United States increased sharply and triggered a global financial crisis, which directly changed the global financial structure and the wind direction of the currency market. In the early stage of the epidemic, although the world economy recovered, it did not come out of a trough. Under the new crown pandemic, the unprecedented easing of the Federal Reserve has deepened the risk of global inflation, which has brought many uncertainties to the development of the world economy.
Will US stock crash like it did in 2008? The essence of the stock market is the change in investor sentiment. If U.S. inflation continues to rise and jumps out of the "control circle", the operating costs of enterprises will increase greatly, and the overflow of large-scale debt defaults will inevitably lead to large-scale stock market selling. The three major indexes will only need one week. It can be cut in half, followed by the domino effect , and foreign investors who have surged since the second half of 2019 will quickly withdraw from the US market. After all, in terms of trading volume, foreign investors have already occupied half of the US stocks.
Data source: Tonglian data
In 2008, there was China, who is there now?
Recall that when the US debt crisis broke out, China vigorously "supported" it, and the size of 's holdings of US treasury bonds has doubled from less than 500 billion US dollars, reaching a maximum of 1.3 trillion US dollars in July 2011. If the inflation driven by the Fed's money printing this time leads to a financial crisis, without China, the United States will have only one company to pay for it - Japan, but it may be powerless. After all, Japan's GDP is only 5 trillion US dollars, and its capacity is limited.
Of course, the United States can still use the hegemony of the dollar in the third world.The world is rampant, and risks are transferred through third parties, but the trend of "de-dollarization" is inevitable. As a result, the global economic pattern of may be reshaped again, which will be an excellent opportunity for China, although China's economic and trade ties are closely linked , but the ability to self-regulate is very strong. China's GDP may exceed that of the United States within ten years. In the second half of the year, let's see how the US asset prices (real estate, stock market, etc.) play out and whether the Fed can turn the tide.