Let’s clarify this matter: since the tariff war began in early April, the prices of risky assets have been like a rollercoaster, going up and down unpredictably. At first, U.S. stocks and cryptocurrency markets plummeted as everyone panicked. But it didn’t take long for them to stabilize and then rise again, even reaching new highs. This reversal was quite unexpected.
Later, the United States began to announce good news, starting with new trade agreements with several countries, and then rolling out the ‘Great Beauty Act’ and the ‘Genius Act’—which, to put it simply, is a strategic reserve for cryptocurrency. Previously, the relationship between the Federal Reserve and the Trump administration was quite subtle, almost a bit antagonistic, but last week when Powell spoke, the market directly caught the underlying meaning, with everyone thinking, 'There's definitely going to be an interest rate cut in September, this is inevitable.'
During this time, Trump was also busy, boasting about how impressive the tariff policy was and how much money it earned for the U.S. He kept pressuring the Federal Reserve, wanting to have complete control over the economy. On the surface, the U.S. economy didn’t seem to suffer due to tariffs, and various indicators looked quite strong. The Federal Reserve had been holding back, thinking the impact of tariffs would take some time to show, which reveals their professionalism and judgment. But now it's different; employment data is a bit lackluster, and they might not be able to withstand political pressure, as the Federal Reserve seems to have eased up. The market had already sensed the change in direction, and last Friday, even before Powell spoke, there was a major stir in the market. The atmosphere now feels like everyone is shouting, 'Keep the party going, keep having fun,' could it be that the Great Leader really saved America again?
However, if we think rationally, how can the impact of the tariff war just disappear so easily? Tariffs are like wedges driven into wood; both sides will definitely get hurt. In the short term, the U.S. has indeed benefited because some opponents have stepped back. But over time, this kind of situation where only one side profits cannot last long. After all, the opponents are not pushovers and will inevitably fight back, especially large countries like China and India, which will sooner or later come up with targeted measures.
Now let's talk about inflation; it still seems to be within a controllable range. However, the costs brought about by tariffs will gradually pass down, and if the Federal Reserve really cuts interest rates and implements loose policies, I’m quite worried whether inflation can remain as stable as it is now.
Moreover, the geopolitical situation is also troubling. The situation in Israel feels like a ticking time bomb, ready to explode at any moment; as for the Russia-Ukraine conflict, it’s a deadlock with no end in sight. Putin certainly will not back down easily, and if Ukraine continues to hold out, it will be fighting to the point of national collapse. Although I have great sympathy for Ukraine from a humanitarian perspective, the reality is harsh, and it’s very difficult to stop this war easily. If Trump thinks he can end the war with some political maneuvering and even win a Nobel Peace Prize, that’s quite naive. Governing a country and waging war is much more complex than doing business.
In the short term, it seems that America has indeed benefited, using the war to make the EU more dependent on itself. However, looking long-term, this will only sow greater geopolitical risks. This year, various European countries have announced increases in military spending, which is the best proof of such uncertainties.
It may be too early to say these discouraging words, and who knows, the Great Leader might be able to save America once again. After all, history has no absolute truths, and economic theories are often contradicted by reality. Because of this, when everything seems calm and even particularly prosperous, we need to pause and think calmly to truly understand what the market is all about.
From a trading perspective, I think the current situation seems quite lively and prosperous in the short term, but there are many hidden dangers in the long term. In the short term, market sentiment is quite optimistic, and driven by policy and liquidity expectations, those risky assets will continue to rise, so trading along with the trend is definitely more reliable; for the medium term, I will focus on the impact of tariffs and the lagging effects of inflation. Once there’s any change in data, market sentiment might reverse immediately; in the long term, geopolitical issues and some structural contradictions are like black swans that can drop at any time, so we must always be prepared defensively and not invest too much money when prices are high.
