A sharp decline would be the best gift to the world

Trump's latest tariff threats have shattered hopes that the trade war is about to ease: global stock markets are down, the dollar has fallen to its lowest point this year, and U.S. Treasury yields have risen—markets are expressing their unease through their actions.

First, the market has not yet entered the worst-case scenario that traders assume, where the 10-year U.S. Treasury yield rises to 5% and the 30-year U.S. Treasury yield rises to 6%—whether or not this occurs, conditions may worsen further before improving.

Second, according to the latest survey, investors continue to be bearish on U.S. stocks next week (65% bearish, 24% bullish), slightly bearish on A-shares next week (45% bearish, 41% bullish), and market sentiment has not improved.

Third, our exclusive indicators show significant signals for the dollar, A-shares, Hong Kong stocks, U.S. stocks, yen, gold, crude oil, and Bitcoin after this week's close.

In this context, a dramatic decline (a “controlled” adjustment) would be the best gift to the world:

On one hand, a sharp drop can eliminate obvious asset bubbles and excessive speculation, quickly wash away excessive optimism and leverage positions, allowing the market to reassess the reasonable range of asset prices.

On the other hand, it would force the Federal Reserve to act and compel Trump to rein in his actions, ushering in a more promising trading environment.

For investors, losing expectations is the most painful. We can choose to face this world with panic and anger, or we can choose to view it with a relaxed, slightly ironic mindset and think gently about what we can do.