1/ This was originally a title for July, but Warsh's remarks in July were too significant. Therefore, we have appropriately extended the span of our monthly analysis. Unsurprisingly, the title remained relevant. As of the date of this monthly report, the incompetent actions of Warsh have already been priced in by the bond market through rapidly steepening yield spreads. The issue of the US dollar has long ceased to be something a Fed Chair can alter or resolve. The interim process will inevitably consist of repeated disturbances.
2/ From a market perspective, we observe US stocks and bonds continuing to view the credit issue in a fractured manner: after selectively clearing some leverage, the stock market has resumed its previous stance of blind faith, but the bond and forex markets continue to deliver ruthless votes of no confidence. The early bottoming of gold and silver provides a relatively clear signal of central bank consensus: the era of Western currencies competing to be the 'least bad' no longer tolerates mere verbal interventions; the prevailing trend is unstoppable. At this moment, we are not concerned about a near-term further bursting of the US stock market bubble. More attention should be paid to how the next step of liquidity release, represented by FIMA, will evolve.
3/ Looking ahead, for Q3-Q4, we remain bullish on rigidly constrained resources in the global supply chain, such as copper and electricity, as well as gold, which continuously prices the trend of monetary credibility loss. For the digital currency market, we believe it is difficult to have significant outperforming trends before the release of excess liquidity and the complete pricing-in of the marginal growth rate of AI.
Market Overview and Commentary on Market Performance:
Regarding market performance, our main views are:
1. Resources and commodities like gold are still likely to be the preferred liquidity-absorbing assets over Bitcoin for now. The consolidation over the past few months has been very healthy:
2. The bullish trend for RMB-denominated assets remains clearly established, and excessive doubt is unwarranted. Taking the core of this rally, the STAR 50 Index, as an example:
3. Not only have spot copper prices led the way to new highs, but key resource country stock indices and forex rates are also approaching the end of their consolidation phases, nearing directional breaks:
Considering the current forex and bond market movements, we tend to believe that resource stocks, including gold and silver, are nearing the end of this round of consolidation. Even after a potential rebound, valuations for some assets essentially include a generous metal price call option for free. Against the backdrop of an inevitable slowdown in the marginal growth rate of AI, some non-ferrous metal assets in the RMB market deserve attention.
From a macro perspective, we attach particular importance to the predictive guidance for future Fed behavior from the recent joint US-Japan forex intervention and the interaction mode between Warsh and Bessent. In fact, a Fed Chair attempting to become a Jiajing Emperor in the twilight of an empire is inherently illogical. Conversely, the Treasury Department directly overstepping the FOMC by utilizing tools like FIMA to serve the supreme leader appears to be the actual behavior honestly being undertaken. As a friend remarked, reduce communication, fabricate data, whitewash peace, and the Great Ming Dynasty can continue its revelry. Based on this, choosing a strategy with a significantly positive Expected Value (EV) over a 3-year horizon, such as going long on non-ferrous and resource stocks, is also a very good option.
