Judging from the current situation, the cliff-diving of U.S. stocks will not cause a new round of economic crisis. The Federal Reserve is continuing to cut interest rates, the economy continues to expand, and the crisis has not yet occurred.

On Friday, after a brief rebound, U.S. stocks suffered a heavy setback, and the market was wailing: the three major stock indexes all fell by more than 2%, the Dow closed down more than 620 points, and the Nasdaq closed down 3%. Apple fell 4.6%, leading the Dow Jones decline. Technology stocks generally fell, with Google and Amazon falling more than 3%, and Tesla (TSLA.O) falling nearly 5%.

The United States is currently in a late economic cycle (generally divided into early cycle, mid-cycle, late cycle, and recession). Generally, the late cycle can last 2-3 years, but it has lasted for 16-17 months now. , but there is still some time before the end of the cycle. Originally, this year was supposed to be a year in which non-U.S. assets outperformed. However, trade uncertainty has led to constant turmoil in the non-U.S. market, while the United States has outperformed. The market is now worried that the investment cycle in the non-U.S. market has been continuously consumed.

Therefore, everyone's mentality is generally - simply stay in U.S. assets with higher risk and return until entering a recession cycle, because historically when the United States enters a recession, non-U.S. regions cannot escape. Of course, institutions are not unaware of the risks of overweighting U.S. stocks. Therefore, in anticipation of increased volatility, institutions have begun to allocate some long-term bonds to hedge against the risks of overweighting stocks.

Bond yields are crucial, and yields are inversely related to bond prices. When bond yields soar, it means that the excess returns that can be obtained from investing in stocks decline, which will also suppress stock valuations. Today, against the backdrop of the Federal Reserve continuing to raise interest rates, economic expansion, and rising inflation expectations, U.S. bond yields are expected to continue to rise.