Despite pre-emptive fears of a "de-dollarization" and a simultaneous collapse in stocks, bonds, and currency ("股债汇三杀"), the US market has proven surprisingly resilient. The passage of the "One Big Beautiful Bill Act" (OBBBA), though contentious, hasn't triggered the predicted market meltdown. This article analyzes the recent market performance, comparing it to previous predictions and anxieties, and posits that the market's reaction likely stems from a combination of short-term liquidity concerns and over-extrapolated long-term anxieties.
The "One Big Beautiful Bill Act" (OBBBA), a significant piece of legislation, recently navigated its way through the US Congress. Despite initial anxieties about potential ramifications for the global financial landscape, the subsequent market performance has been surprisingly stable. Over the past three months, concerns about the "de-dollarization" of the global economy and the anticipated "股债汇三杀" (simultaneous decline in stocks, bonds, and currency) have proved largely unfounded.
Instead of the predicted market meltdown, US stocks have outperformed global markets, reaching new highs. The Nasdaq, in particular, has rebounded by 35% from its recent lows. Intriguingly, US Treasury bond yields have not surged further, and the US dollar, while remaining weak, hasn't experienced the dramatic decline that some had anticipated. Even with the initial flow of capital out of US stocks and bonds, investment has returned, suggesting a degree of market confidence.
This resilience aligns with previous market analysis. As early as April 8th, our analysis highlighted the potential attractiveness of US stocks, particularly the Nasdaq, as valuations dropped to around 20 times earnings per share (P/E). This analysis advocated against further short-selling positions. Furthermore, amidst the peak of "股债汇三杀" anxieties, our earlier reports emphasized the temporary nature of these concerns. We argued that the anxieties were largely the result of short-term liquidity issues and overly pessimistic projections about long-term trends.
The recent market performance, therefore, suggests that the passage of the OBBBA, while significant politically, hasn't translated into the catastrophic economic consequences some predicted. The resilience of the US market suggests a degree of confidence in the economic fundamentals. While external factors undoubtedly play a role in global financial markets, the market's ability to absorb such legislative changes—and even outperform during a period of anxiety—underscores the complex interplay of various economic factors.
The key takeaway is that while the political landscape can influence market sentiment, the market's own internal dynamics and fundamental economic strength often prove to be more decisive in determining its trajectory. Further analysis of the specific data points, coupled with an understanding of the broader political and economic context, will provide a more complete picture of the evolving situation.
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