After the elimination of inflation and confirmation of interest rate cuts, the market is currently dominated by two forces: one is the expectation of recession, and the other is liquidity.

Now it is probably the result of the superposition of the two. Yesterday, I discussed liquidity with @qinbafrank. The conclusion is that the uncertainty of liquidity reversal is high. I am relatively pessimistic and think that at least there will be some changes after the election.

Then the other problem is recession. I am not particularly worried about recession itself. The current unemployment rate is 4.2, and even if there is a recession, it will be a shallow recession. I don’t see the risk of a particularly large recession. A few more words:

- The bubble in 2008 was in subprime mortgages (poor people buying houses)

- The bubble in 2000 was in the Internet

- The crisis in 1990 was the savings and loan crisis + Iraq’s invasion of Kuwait doubled the oil price. In simple terms, the savings and loan crisis was also caused by the inverted interest rate, which led to the bankruptcy of more than 1,000 institutions.

Under the current market structure, households have excellent balance sheets (net assets far exceed historical levels), and companies have no major problems with estimates. Leverage is mainly in the government, and everyone knows that as long as the US dollar has credit, it can borrow unlimitedly.

Then you say war risk? At least it can't be seen from oil prices.

The biggest recession risk is still China, because China has always been the leader of global economic growth, and now China's economy is declining under the influence of the decline in real estate. But this may have a greater impact on resource-rich countries, and may have a slight impact on the US stock market (such as companies like Apple and Tesla).

Finally, it is Russia and Ukraine. Let's see if NATO will make any big moves to expand the war before the election. So far, it feels that Ukraine has come up with all the tricks it wants to use, and there is no risk of further expansion of the war for the time being.

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The question is, under what circumstances will everyone confirm that the recession risk has been eliminated? I feel that we still have to wait for the general election results to be implemented. Hahaha proposed high taxes, which is obviously not conducive to the economy and the stock market. On the contrary, if Trump is elected, the boost to the market should be obvious.

So, it may still follow the trend of historical election years, bottoming out in October and rebounding in November.