The US stock market experienced its biggest fluctuation since 2019.

Over the past week, although the US stock market remained flat overall, it experienced significant fluctuations. On Monday, there was a panic sell-off, followed by substantial market volatility in the following days. Nevertheless, the adjustment was not particularly large, retreating about 8% from its all-time high, and it is still 12% higher than at the beginning of the year.

The stock market and the cryptocurrency market exhibit a high degree of correlation. The focus of the market is on the risks of a U.S. economic recession and the unwinding of yen carry trades. However, in reality, the duration of true panic is quite short. There has not been a typical crisis period where all assets are sold off.

Currently, the overall performance of the US economic data is good, and corporate earnings growth is also decent. As for Japan, the possibility of continued interest rate hikes is low. The large drop on Monday was more due to unexpected factors and forced liquidation of high-leverage positions.

However, market sentiment still needs further observation. The disappointment in technology stocks has deepened. Unless leading companies like Nvidia can exceed expectations again, technology stocks may find it difficult to significantly outperform in the short term.

Analysis of Interest Rate Cut Expectations in September

Currently, the market expects the Federal Reserve to cut interest rates by 25 to 38 basis points in September, with an overall reduction of about 100 basis points for the year. However, this expectation may be too aggressive and requires a continued deterioration of the labor market to support it.

In the short term, the interest rate market may show a fluctuation pattern. However, in the medium to long term, the interest rate cut cycle will eventually begin, and the market is still in a buy-the-dip mode.

Cryptocurrency Market Analysis

Bitcoin has experienced its sharpest pullback since the FTX incident, with a decline of more than 15% at one point. However, this adjustment is mainly influenced by traditional financial markets and not due to issues within the cryptocurrency itself. The technical indicators are severely oversold, similar to the situation on August 16 last year.

Institutional investors remain relatively optimistic about cryptocurrencies, mainly based on the following points:

1. Morgan Stanley allows advisors to recommend Bitcoin ETFs
2. The bankruptcy liquidation pressure of Mt. Gox and Genesis has eased.
3. The bankruptcy of FTX may release a large amount of funds into the market
4. Both sides of the U.S. election may support policies favorable to cryptocurrency.

Funds and Position Analysis

Although the recent stock allocation has decreased, the current allocation ratio of 46.5% is still significantly higher than the average level since 2015. To return to the historical average, stock prices need to drop by about 8%.

Investors' cash holdings are at extremely low levels, which may increase market vulnerability. Bond allocations have noticeably increased, reflecting a rise in risk aversion.

Retail investors reacted relatively mildly, with no large-scale withdrawals. Nikkei futures and long positions in the yen have been significantly reduced.

The total scale of "Yen Arbitrage Trading" is estimated to be around 4 trillion USD, mainly including:

1. Foreign investors purchased Japanese stocks ( for about 600 billion USD )
2. Foreign investors borrow yen to invest overseas ( approximately 420 billion USD )
3. Japanese investors' overseas investments amount to approximately 3.5 trillion USD (.

![Cycle Capital Macro Weekly Report (8.12): US Stock "Recession Trade" Overdone, Mainstream Cryptocurrencies Misjudged])https://img-cdn.gateio.im/webp-social/moments-29f33108b42bd5b963c79cddb2730ecd.webp(

Upcoming Key Events

• CPI data released
• Retail sales data released
• Jackson Hole Conference
• NVIDIA Financial Report

These events may have a significant impact on the market and should be closely monitored.

![Cycle Capital Macro Weekly Report (8.12): Excessive "Recession Trade" in US Stocks, Mainstream Cryptocurrencies Wrongly Killed])https://img-cdn.gateio.im/webp-social/moments-d8e684b139019239cb7a6d726178b5a0.webp(