Asset Collapse: Global Market Plunges into Chaos
The global financial market is experiencing its darkest moment, with a storm triggered by U.S. President Donald Trump's new tariff policy sweeping across major asset classes. On Monday's opening, U.S. stock futures were dismal, with S&P 500 stock index futures falling 3.2%, Nasdaq 100 stock index futures plummeting 5.7%, and the panic index VIX futures surging 34.4% to 45.8, reaching its highest level since 2022. Risk-averse sentiment pushed up 10-year U.S. Treasury prices, with the yen appreciating 1.3% against the dollar, and spot gold dropping to $2,988.61 per ounce.
Last Thursday, the S&P 500 index plunged 4.8%, closing at 4,850 points, marking the largest single-day decline in 2024. On Friday, the selling wave further intensified, with the Dow Jones Industrial Average dropping 2,231 points, a 5.5% decline, closing at 38,900 points, erasing gains from the past two months. The Nasdaq Composite Index, dominated by tech stocks, fell a cumulative 11.8% over two days, officially entering bear market territory. Tech giants performed poorly: Apple dropped to $205, a 5.5% decline; Tesla intraday fell as much as 10.3%, closing at $310; Nvidia's market value evaporated by over $300 billion, a 9.1% drop. Global stock markets were simultaneously under pressure, with Japan's Nikkei 225 Index falling 5.6% on Monday's opening, temporarily suspending trading for 15 minutes due to hitting the 7% circuit breaker; South Korea's KOSPI Index dropped 4.9% to a six-month low; Europe's STOXX 600 Index opened down 3.8%.
Commodities markets were not spared. Gold broke below the $3,000 per ounce psychological level, touching a low of $2,988.61, a 1.9% decline, while silver fell 2.3% to $34.50 per ounce. The energy market was severely hit, with WTI crude oil futures dropping to $59.80 per barrel, down 12% from last week's high, reaching a new low since April 2021; Brent crude fell to $63.20 per barrel. Industrial metal prices declined, with New York copper futures falling 8.2% to $3.85 per pound, reflecting market pessimism about global manufacturing. Foreign exchange markets became more volatile, with the Australian dollar falling 1.1% against the U.S. dollar to 0.6350, the euro dropping 0.9% to 1.0450, and the U.S. dollar index rising to 104.50, a three-month high.
The cryptocurrency market could not escape the fate of risk assets. CoinMarketCap data shows the global crypto market cap shrinking from $2.4 trillion to $2.16 trillion, a 10% decline. Bitcoin dropped 6%, touching a low of $77,100; Ethereum fell 12.4% to $1,540. The crypto market's performance highly synchronized with Nasdaq, highlighting its characteristic as a "high-beta asset". The network's liquidation amount in the past 24 hours was $886 million.
Concerns in the bond market are also escalating. The MOVE Index (Merrill Lynch Option Volatility Estimate Index), a measure of U.S. Treasury implied volatility, surged from 108.50 at the end of March to 125.71, a 15.8% increase. BitMEX founder Arthur Hayes noted: "To predict when the Federal Reserve will succumb and significantly ease, the MOVE Index is a key indicator. The higher the index, the higher the margin requirements for Treasury and corporate bond financing transactions, and selling pressure will sweep the market. This is the domain the Federal Reserve is determined to defend. If it breaks 140, easing policy will be inevitable." The current level is just a step away from the critical point, suggesting greater turbulence is imminent.
Trump's Poker Face and Market Confrontation
Facing market collapse, the Trump administration displayed unusual composure. Treasury Secretary Steven Besent stated on Sunday: "Market volatility is temporary, and the economic fundamentals have not collapsed." Commerce Secretary Robert Lighthizer took a hard stance: "Tariffs are necessary protective measures for the U.S. economy and we will not back down." Trump posted on "Truth Social": "Don't be afraid, this is just a small episode on the path to prosperity." Hayes analyzed: "Many of Trump's core supporters do not hold stocks or financial assets. For them, market decline even brings a psychological satisfaction against 'Wall Street elites'. This gives Trump the confidence to push tariffs, as he knows voter support won't be lost."
The market, however, remained unmoved. U.S. Federal Funds futures indicate investors are betting on 120 basis points of rate cuts this year, implying five 25 basis point cuts. JPMorgan predicts the Federal Reserve might start consecutive rate cuts from May, reducing the federal funds rate to 2.75%-3.0% by January 2026. Goldman Sachs warns that if tariffs are fully implemented, the U.S. 2025 GDP growth rate might be revised down to 1.2%, while inflation could rise to 3.8%, leaving the Federal Reserve in a dilemma. An anonymous Wall Street hedge fund manager stated: "Investors no longer believe the government's optimistic promises, they only look at data and the Federal Reserve's next move."
Trump's statements further escalated uncertainty. He shared a video on "Truth Social" hinting he might intentionally let the stock market drop 20% to boost Treasury demand, suppress the dollar, and lower mortgage rates. White House Economic Advisor Kevin Hassett urgently clarified: "This is just the president's personal idea, not a policy goal." But market trust has been severely damaged, with the VIX index further rising to 47.2 before Monday's opening.
Historical Lessons: Bitcoin's Difficulty in Independence, Seeking Opportunities in Crisis
The current situation recalls historical crisis moments. On the 1987 "Black Monday", the Dow Jones index plummeted 22.6% on Monday after weekend panic, creating a single-day decline record. The March 2020 COVID-19 induced circuit breaker crisis was even more recent, with the S&P 500 index triggering circuit breakers 4 times in 10 days:
In that crisis, the S&P 500 index fell from 3,393 points in late February to 2,237 points on March 23, a decline of over 34%. Bitcoin's performance was particularly brutal, plunging 39.5% on March 12, creating a rare single-day decline in the crypto market. Notably, Bitcoin failed to create an independent trend, instead highly correlating with Nasdaq, even amplifying tech stocks' performance. CNBC commentator Jim Cramer pointed out: "The 2020 lesson is that Bitcoin is no longer a safe-haven asset, but a 'large Nasdaq', with risk exposure far exceeding traditional stock markets." Now, the same pattern is repeating: Bitcoin's correlation with Nasdaq 100 recently rose to 0.85, far higher than gold's 0.12, indicating its vulnerability in panic environments.
History also reveals opportunities. After each 2020 circuit breaker, short-term market panic intensified, but the Federal Reserve quickly cut rates to zero and launched unlimited QE, ultimately stabilizing the situation. Although driven by policy, the Monday panic outbreak follows a similar pattern to previous crises. Cramer added: "The common point between 1987 and 2020 is that weekend-brewing fears spiraled out of control on Monday. Today, the trade war's opacity leaves investors with nowhere to hide."
Global Impact and the Counterattack of Safe-Haven Assets
The ripples of this storm have spread globally. The Chinese Ministry of Commerce stated on Sunday: "We will take resolute measures to counter." The EU Trade Commissioner warned of potential tariffs on US cars and agricultural products. India and Brazil are also assessing retaliatory measures. Last week's 7.2 magnitude earthquake in Myanmar further disrupted rare earth and semiconductor supply chains, driving up technology manufacturing costs. Morgan Stanley estimates that if the supply chain crisis continues, global economic growth could be revised down by 0.5 percentage points by 2025.
Safe-haven assets have become a rare bright spot. The 10-year US Treasury yield fell 10 basis points to 3.89%, while the 2-year yield dropped 19 basis points to 3.46%. Bloomberg data shows that the global negative-yield bond scale has risen to $16.5 trillion, reaching a 2023 high. The Japanese yen strengthened to 148.50 against the US dollar, and the Swiss franc rose 0.8%. Although gold has pulled back in the short term, it remains attractive long-term, with UBS predicting it may return to $3,100 per ounce by year-end.
The Federal Reserve's Tipping Point: The MOVE Index's Warning
The Federal Reserve is facing unprecedented pressure. Tariffs may drive up import costs, with inflation concerns emerging - Goldman Sachs estimates that if 34% tariffs are implemented, US CPI could rise by 1.2 percentage points within 12 months. However, market crashes and bond volatility are forcing easing. Hayes' MOVE index theory has become the focus: "When the MOVE index rises, the financing costs of Treasury trading surge, and selling pressure will be transmitted to the financial system. The Federal Reserve has no choice but to act. 140 is the tipping point." The current index is at 125.71, and if panic intensifies on Monday, it could quickly break through.
There are internal disagreements at the Federal Reserve. Hawkish officials advocate waiting for inflation data, while doves warn that delays could trigger systemic risks. Chicago Fed President Evans stated: "When markets are disorderly, monetary policy must be decisive." The market expects the May FOMC meeting might initiate rate cuts, potentially by 50 basis points.
Where is the Turning Point: Glimmer After the Massive Shock
Hedge fund manager Bill Ackman proposed another possibility: "If Trump announces a tariff delay on Monday to create negotiation space, the market might catch its breath." But he also warned that if the policy remains hard-line, the S&P 500 could drop another 10%, with the economic recession risk rising from the current 35% to 60%. Ackman summarized: "Regardless, this Monday will determine the direction of the coming months."
Although this shock is chilling, it may breed an opportunity. After the 2020 meltdown, the Federal Reserve's decisive intervention reversed the downward trend; now, the MOVE index's warning bell is ringing, and the pressure for rate cuts is increasing daily. If the Federal Reserve yields, loose policies might inject vitality into the market and reignite investor confidence. History tells us that the deepest darkness often accompanies a glimmer of light. Trump's tough stance and the market's fragility are in a tug of war, with the Federal Reserve's choice becoming the decisive variable.
The call for rate cuts is growing louder - perhaps the first ray of sunshine after the storm. For investors, gold's pullback is a window for buying the dip, and the tech stocks' collapse is a touchstone for testing patience. As Ackman said, this Monday will be recorded in history, and the Federal Reserve's actions might unexpectedly conclude this crisis.
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