Friends, recent movements in the US dollar and US stocks are reminiscent of the situation before the 1987 stock market crash. However, whether history will repeat itself remains to be seen.

Let's start with the similarities: In 1987, the dollar fell 7% at the beginning of the year, and the government urged the Federal Reserve to cut interest rates; now, the dollar's trend is unstable, and the government is also pressuring for rate cuts. If the Fed cuts sharply, the dollar may fall sharply. Portfolio insurance strategies exacerbated the decline back then. Now, passive investment and shorting volatility trades are large in scale. Once volatility rises, liquidation may make the volatility even more severe. Also, the US stock market has performed well this year, but most stocks have not followed, and the breadth of the increase is weak, which is also similar to before the 1987 crash.

However, there are many differences: after 1987, the US stock market had a circuit breaker mechanism. Trading is suspended when the S&P 500 falls by 7%, 13%, and 20%, which can prevent a "waterfall" crash. Inflation rose sharply back then, rising by 3 percentage points from January to October, and interest rates and Treasury yields also soared, impacting liquidity; now inflation is moderate and the financial environment is loose, and this is not the case. In addition, in 1987, the economy and inflation accelerated upward. Although the US economy occasionally exceeds expectations now, the momentum is much weaker, and the macro indicators are also different.

Therefore, although there are similar signals, the market environment and system have changed, and history is unlikely to repeat itself in the same way, but risks still need to be guarded against.