In recent months, global financial markets have found themselves in an extremely unstable position. Despite overall investor confidence in a long-term bullish trend, the real picture shows signs of overheating and high correction risk. Most market participants continue to hold long positions, hoping for further growth; however, fundamental and political factors indicate the possibility of a serious collapse in the near future. The main catalyst for this tension is the combination of high interest rates from the Fed, an expensive dollar, and political pressure from Donald Trump, who is trying to influence economic policy.
📈 Overheated market and lack of liquidity
Currently, markets are experiencing a serious imbalance between supply and demand. Most investors are in long positions, creating the illusion of a sustainable bullish trend. However, such a skew makes the market vulnerable to any wave of sell-offs that could trigger a domino effect.
• High demand for assets alongside a liquidity shortage means that buyers have exhausted their options, and any negative event may trigger a sharp decline.
• Marginal positions remain at record highs, increasing the likelihood of mass liquidations during a correction.
In the event of a wave of sell-offs, this will lead to a snowball effect in falling prices, as many large funds and algorithmic trading systems will begin to automatically reduce positions, exacerbating the decline.
🏛️ The Fed and the expensive dollar: a blow to the US economy
A key factor exacerbating market tension remains the tight monetary policy of the Federal Reserve (Fed). In recent years, the Fed has pursued an aggressive rate-raising policy to combat inflation. As a result:
• Interest rates have reached multi-year highs, making the cost of borrowing for businesses and consumers extremely high.
• An expensive dollar negatively impacts the exports of American companies, reducing their competitiveness in global markets.
• High rates also increase the cost of servicing the US national debt, which has already exceeded $35 trillion. This creates additional pressure on the budget and raises the risk of a debt crisis.
In the context of an expensive dollar and high rates, companies are facing shrinking profits, which will inevitably lead to a decline in stock indices.
🎯 Trump and pressure on the Fed
Against this backdrop, Donald Trump is actively trying to influence the Fed to achieve lower interest rates.
• Trump has repeatedly criticized the Fed chair for 'overly tight' monetary policy.
• Lowering rates would make loans cheaper, weaken the dollar, and stimulate economic growth.
The Fed is an independent institution, despite pressure from the White House. The Fed is aware of the risks of accelerating inflation in the event of premature easing of monetary policy, which makes the likelihood of an immediate rate cut extremely low.
💥 Artificial collapse as a political weapon
In this situation, one cannot rule out a scenario where an artificial market collapse could become a tool for political pressure. If markets begin to fall, it will create an atmosphere of panic and force the Fed to take measures to stabilize the situation more quickly — primarily by lowering rates.
In the event of a negative scenario, a collapse in American markets will inevitably trigger a chain reaction in global markets, leading to a global recession.
🔍 What will happen next?
At this stage, the key question is how quickly the Fed will move to lower rates. If the Fed maintains a tight policy, a market collapse could become a reality in the coming months.
However, if the Fed does yield to Trump's pressure and starts a cycle of easing, it may support the markets in the short term but will intensify inflationary pressure and create a risk of a repeat crisis in the future.
Conclusion:
• The market is overheated and vulnerable to correction.
• The Fed maintains a tight policy despite Trump's pressure.
• Expensive dollar and high rates create problems for the US economy and global markets.
• Trump's political game may provoke an artificial collapse to force the Fed to ease its policy.
👉 In such conditions, investors should remain cautious, diversify their portfolios, and avoid excessive risks in anticipation of possible turbulence in the markets.