Nice to work with you again today.

This is Ere.

Real-time tweets are posted here.

twitter

※This article does not indicate or recommend buy/sell timing.

The overall market has been weak, and many factors could be at play, but considering the selling of U.S. Treasuries, stocks, commodities, and cryptocurrencies, especially in the NY market, it is reasonable to assume that positions built from the bottom during the Corona Shock are entering profit-taking mode.

Notice that funds are also flowing out of the safe-haven bond market.

Institutional investors will trim positions at some point within the year due to annual reports, and this year there are U.S. presidential election and Japan's leadership race.
From history, such major events cause large price movements and increase risk.
Given the timing, with only three months left until year-end, the presidential election in November, and the U.S. stock indices near their all-time highs just before declines, and with the broad policy direction seen at the Jackson Hole meeting, it would not be surprising to surmise that this year’s rise had already been established.

In this article, including the periscope/TweetCast broadcasts, we have been saying that U.S. stocks would soon see profits of around USD 1,000, and so far, the movement has followed that image.
In the author’s current thinking, looking for reasons for this drop risks missing the essential point, so it is considered appropriate to view it as the unwinding of positions built from the Corona period.

On the other hand, it’s important to keep in mind that the Fed is also paying attention to employment.

Numerically, the employment statistics ended slightly positive, but this time the census of every ten years includes hired personnel, so there seems to be a magic number where actual employment has declined.

Economically, ISM has remained steady since the shock, but as seen in the Nasdaq’s resilience, there has been a shift from existing economic sectors to new fields, with increased investment in equipment and other areas, so we remain somewhat cautious.

The near term is very fragile, and the transition into autumn could make this volatility more evident.

The trigger may have been profit-taking, but for stocks bought on hope, this could become a burden.

The mistaken view of the dollar as a safe asset

As the world moves toward monetary easing, the Fed’s easing measures have been unprecedented in scale.

Even fiscal policy included subsidies on unemployment benefits, flooding the U.S. with easy money.

Where did the flood of money go?

This is a comparison chart of gold, Dow, and the dollar index. While U.S. stocks fell sharply, the dollar spiked, and as easing measures were announced, the dollar began to be sold gradually, with funds moving into U.S. stocks and gold.
If you take a risk-off approach and blindly buy something, you may misread the perspective. From the author’s view, stocks, gold, and the dollar are all currencies in trading, so the idea is to sell the dollar to buy U.S. stocks, or sell U.S. stocks to move back into the dollar.

A bubble-like surge was undoubtedly led by the United States, and in a cash-out phase, a broad decline and rising dollar are likely to occur together.

From the perspective of safe-haven assets, gold will still be treated as such, but since its rate is already high, it will be hard to actively accumulate, so a small amount of risk diversification paired with dollar strength will lead to a guarded, range-bound movement.
In the end, it’s hard to expect continued gold gains during a cash-out phase unless other risks emerge; if the global economy resumes growing, it is reasonable to expect a general downward trend.

Regarding value as a universal metric, currencies, stocks, and gold are all on the same playing field, and where you place your assets determines market movements.
This is necessary thinking for building positions with a long-term perspective, so please consider incorporating it into your trading.

From the perspective of currency-safe assets, the yen still appears to maintain that role.

A risk-off phase can be described as a time to refrain from investing, pulling funds out of investments.
Considering the economic situation, it is unlikely that funds will rapidly flow into the yen, but since Japan has a large external asset balance and substantial overseas investment, if overseas funds return to the yen, the yen could surge.

For example, if domestic companies repatriate assets invested in U.S. Treasuries or U.S. stocks into yen, the yen would spike.

There are many factors behind the yen-buying mechanism, but given Japan's large internal reserves and household net worth, it’s reasonable to say there is a substantial amount involved.

The end of the long summer vacation for institutional investors

The market is closed on Labor Day with the Monday following a holiday in the U.S.

You might wonder what Labor Day is; in Japan, it could be likened to Kinrō Kansha no Hi, or Respect for the Work Day.

A holiday celebrating the hard work of a year. Good job!

Institutions tend to take long breaks from the end of July to Labor Day, and a lack of decisive moves in August may end around this day.

From here, fundamentals and currency flows will gradually be observed as markets return to normal.

Their current market reactions will become clearer in Tuesday’s stock movements.

From a long-term perspective, the Fed’s commitment to keeping rates low provided safety and security for the U.S. stock market.
Short-term declines are expected, but the long-term trend remains intact.

On the other hand, the presidential election presents a clear risk in the near term. If you look at the situation from a broad perspective, once the presidential race clarifies, funds will be投入, undervalued stocks will attract buyers, and profit-taking in overextended names is likely to continue.
Tech stocks that surged due to COVID-related demand may still see profit-taking, and allocations may shift from growth to value stocks.

The Nasdaq index seems likely to show these effects most clearly, so we should approach trading with an eye on potential unexpected declines.

[free article] Market reaction summary and environmental recognition