Dollar to Fall Below 100: 3 US Risks That Could Trigger a Crash

01, Inflation is still at high levels

The optimism of American investors is gradually dissipating, and the US stock market has experienced a continuous decline in recent days, with a new wave of selling starting again.

Previously, the inflation data released by the United States showed a significant decline, leading to increased expectations that the Federal Reserve's monetary policy would shift, resulting in a rebound in the US stock market.

Federal Reserve officials have repeatedly reminded investors that inflation has not truly passed, and the current decline in CPI year-on-year data is only due to the increased comparison base.

What truly needs attention is the month-on-month CPI data, which saw its first decline in December, but the drop was only 0.1%. If the month-on-month data shows a continuous and more significant decline, inflation may truly reach its peak and start to fall.

02, Reminder to sell

In response, J.P. Morgan's Global Chief Strategist also released a new report, reminding investors to sell US stocks as soon as possible. In this report, they analyzed and pointed out that the rebound in US stocks is about to end, and it is still time to sell shares for profit-taking; otherwise, there is a high likelihood of encountering a significant downturn.

Advertisement

J.P. Morgan believes that all the good news has already been realized, and unfavorable news will follow one after another. It now appears that the fourth-quarter earnings reports are far from meeting market expectations.

The data model from the Federal Reserve Bank of New York also shows that the possibility of a US economic recession in the coming year has reached 47%, a possibility higher than at any time since 1982. The inversion of US short and long-term Treasury yields continues, with the two-year Treasury yield gradually falling close to 4%, but still significantly higher than the yield on 10-year Treasury bonds.

03, 3 major risksCurrently, although the Federal Reserve is still raising interest rates, the US Dollar Index has already turned downward, which has also laid several major pitfalls for the future global financial market.

Starting from last Friday, the US Dollar Index has broken below 102 for five consecutive trading days, reaching a low of 101.5 at times. Analysts believe that the US Dollar Index may break below the psychological level of 100 before the end of this month.

Previously, the US dollar has been appreciating, with funds continuously flowing into the United States, and the US stock market has still experienced a significant decline. If the US Dollar Index continues to fall in the future, funds will continue to flow out of the United States, and the US stock market may face an even larger wave of selling.

Investors may have gradually become accustomed to the decline in the US stock market, but there are two other greater risks for the US economy that may be triggered.

The second is the risk in the US real estate market. As the Federal Reserve will continue to raise interest rates, US mortgage interest rates will continue to remain at high levels or may even reach new highs, which is a significant blow to the real estate market. Currently, the transaction volume is relatively low, and what may occur in the future is a substantial decline in housing prices.

The third risk comes from the US manufacturing industry, which is already on the brink of recession, with retail data below expectations. The domestic consumer demand in the United States is continuously shrinking.

As of the closing of the US stock market this morning, large technology stocks have seen gains and losses, with META rising by 2.35% and Google by 2.1%. However, in comparison, the decline seems to be more significant, with Netflix falling by 3.2%. In addition, Amazon fell by 1.9%, and Microsoft by 1.6%.

Nevertheless, after the closing, Netflix, which had previously seen a significant decline, experienced an 8% increase. The reason may stem from the company's fourth-quarter financial report, in which the number of paying subscribers increased by 7.66 million, far exceeding the market's expectation of 4.5 million.

In terms of new energy vehicles, the leading US company Tesla fell by 1.25%, while China's NIO and XPeng fell by about 2%, but Li Auto slightly rose.However, Chinese concept stocks rose against the trend. Although the Nasdaq index fell by 1%, the Nasdaq Golden Dragon China Index rose by 1.4%.

Among them, Alibaba rose by 3%, Baidu rose by 1.8%, and JD.com rose by 1.5%.

Apparently, the market is still waiting for the release of more Q4 financial reports to observe the future trend of the US economy.