The volatility of U.S. stocks has rarely surpassed that of emerging markets and Bitcoin, while U.S. Treasury bonds, which have always been considered safe assets, have also experienced severe fluctuations, leading investors to begin questioning the wisdom of holding U.S. assets. UBS believes that once global risk-free interest rates start to fluctuate, it means that all markets will be disrupted. Analyst Ed Al-Hussainy pointedly noted: 'I’m not actually worried about a recession; I’m worried about a financial crisis.'
U.S. stocks regained their upward momentum on Friday, appearing to show a recovery in market risk appetite, but in reality, investors have begun to question the safety of U.S. assets, especially with the sharp volatility of U.S. Treasuries casting a shadow of fear over Wall Street regarding a financial crisis.
In the past week, the yield on the U.S. 10-year Treasury bond recorded its largest single-week jump in over 20 years, while U.S. stocks plummeted and then surged. On the surface, the S&P 500 index rose more than 5% for the week, Treasury yields returned to February levels, and Bitcoin closed higher, seemingly everything was normal.
However, what is unsettling is the simultaneous decline of U.S. stocks, Treasuries, and the dollar this week, which is a typical characteristic of emerging markets rather than the performance of the world's safest assets. Particularly, the significant volatility in U.S. long-term bonds this week suggests that a liquidity crisis may be imminent, prompting investors to question the wisdom of holding U.S. assets. Trump's recent tariff policies have not only undermined confidence in the U.S. economy but have also shaken investors' trust in U.S. policy direction and dollar assets. Even by Wall Street's long historical standards, this week has been a brutal trading week.
