The market is now clearly being driven by the dollar tide. Specifically:
- Good news tends to come out during U.S. market hours, siphoning global capital into the U.S. For example, reports of peace talks in the Middle East pushed oil prices down, lowering Treasury yields and lifting both U.S. stocks and the dollar.
- Bad news tends to come out outside U.S. market hours. Global stocks fall and capital flows out. Recently, Europe has been hit by a double whammy of falling stocks and bonds, while Asian markets have also mostly declined. This is all part of the same trend.
The dollar tide used to be controlled through Fed rate hikes and cuts. Now it is being driven by high oil prices and the AI narrative. Global liquidity is under pressure, European bond yields keep hitting new highs, and gold and Bitcoin are falling.
Bitcoin has held up better than gold because it is also an “official” dollar asset, and Wall Street is clearly giving it a helping hand.
The takeaway is that U.S. AI stocks and Bitcoin are both candidates for a “buy the dip” strategy. Non-U.S. assets have been hit especially hard in this round of selling, and for now there’s no clear solution in sight.
That also makes the recent weakness in China’s A-shares easy to understand. As for rumors of 65% sanctions on overseas optical-module makers, they’re all tactics to grab liquidity—the aim is to pressure our technology sector.
Meanwhile, the policy stance here for Q3 has already been made clear. The market isn’t seeing many compelling themes, so this wait-and-see mood will probably persist for a while. It’s still important to hedge: shorting stock-index futures, or moving into high-dividend stocks or the energy sector, are all options.
Gold: The central bank continues to increase its gold purchases, which is why prices haven’t broken below 4,000. But in this environment, there’s not much fuel for a big rally, so I’m not considering it for now.
Bitcoin: The dense cluster of holdings around 86,000 hasn’t been broken through. Below 80,000, I’d consider dollar-cost averaging.
U.S. stocks: On the AI side, I’m still focused on hardware names like NVDA, MU, and AMD, plus software stocks among the Magnificent Seven. Keep tracking these, or watch the Nasdaq for opportunities if it falls. A standard position size is fine.
The U.S. economy is still running fairly hot as we enter October, and Q3 corporate earnings may continue to beat expectations. Democrats are still leading in the midterm elections, and the market is gradually becoming less sensitive to high Treasury yields. So despite all the bearish chatter online, U.S. stock volatility is actually not that high. The next risk could come when Anthropic goes public and sucks liquidity out of the market, triggering a bout of liquidity-driven selling. Of course, that could also create a dip worth buying.
The central bank published an excellent article today refuting the argument that the yuan is overvalued and rejecting an overseas “Plaza Accord” targeting the yuan. It’s very well written—worth a read.
- Good news tends to come out during U.S. market hours, siphoning global capital into the U.S. For example, reports of peace talks in the Middle East pushed oil prices down, lowering Treasury yields and lifting both U.S. stocks and the dollar.
- Bad news tends to come out outside U.S. market hours. Global stocks fall and capital flows out. Recently, Europe has been hit by a double whammy of falling stocks and bonds, while Asian markets have also mostly declined. This is all part of the same trend.
The dollar tide used to be controlled through Fed rate hikes and cuts. Now it is being driven by high oil prices and the AI narrative. Global liquidity is under pressure, European bond yields keep hitting new highs, and gold and Bitcoin are falling.
Bitcoin has held up better than gold because it is also an “official” dollar asset, and Wall Street is clearly giving it a helping hand.
The takeaway is that U.S. AI stocks and Bitcoin are both candidates for a “buy the dip” strategy. Non-U.S. assets have been hit especially hard in this round of selling, and for now there’s no clear solution in sight.
That also makes the recent weakness in China’s A-shares easy to understand. As for rumors of 65% sanctions on overseas optical-module makers, they’re all tactics to grab liquidity—the aim is to pressure our technology sector.
Meanwhile, the policy stance here for Q3 has already been made clear. The market isn’t seeing many compelling themes, so this wait-and-see mood will probably persist for a while. It’s still important to hedge: shorting stock-index futures, or moving into high-dividend stocks or the energy sector, are all options.
Gold: The central bank continues to increase its gold purchases, which is why prices haven’t broken below 4,000. But in this environment, there’s not much fuel for a big rally, so I’m not considering it for now.
Bitcoin: The dense cluster of holdings around 86,000 hasn’t been broken through. Below 80,000, I’d consider dollar-cost averaging.
U.S. stocks: On the AI side, I’m still focused on hardware names like NVDA, MU, and AMD, plus software stocks among the Magnificent Seven. Keep tracking these, or watch the Nasdaq for opportunities if it falls. A standard position size is fine.
The U.S. economy is still running fairly hot as we enter October, and Q3 corporate earnings may continue to beat expectations. Democrats are still leading in the midterm elections, and the market is gradually becoming less sensitive to high Treasury yields. So despite all the bearish chatter online, U.S. stock volatility is actually not that high. The next risk could come when Anthropic goes public and sucks liquidity out of the market, triggering a bout of liquidity-driven selling. Of course, that could also create a dip worth buying.
The central bank published an excellent article today refuting the argument that the yuan is overvalued and rejecting an overseas “Plaza Accord” targeting the yuan. It’s very well written—worth a read.