Gold, Coin, Stock, Real Estate

Gold, Coin, Stock, Real Estate
It’s an era where all assets go up
The Asset Market Is Hot!

However, there are also signs that they were similar in many ways to the past bubble period. Rather than being too optimistic, I think it is now necessary to pay attention to the perspective of concern about the market.

One of Trump’s most hated people
Let’s also take a look at the perspective of Moody’s chief economist Mark Zandi!

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🐭 Mark Zandi warns of ‘asset market shock’ scenario

Mark Zandi said, “The U.S. economy and the asset market are very much in anticipation of AI innovation
Although it is recognized for its high value, it is considered to be in a vulnerable state that can be greatly shaken even by such a small impact.

What he points to as the epicenter of the “shock” is former President Trump’s key economic policies: ① imposing widespread high tariffs and ② attempts to undermine the independence of the Federal Reserve.

The development of the situation he is concerned about is as follows.

▶ Step 1: Policy Shock and Market ‘Loss of Trust’
• Imposing High Tariffs: When Trump’s pledged “universal 10% tariffs” and “60% tariffs on Chinese goods” materialize, they immediately drive up import prices, re-stimulating inflation.
• Damaging Fed Independence: If the Trump administration replaces the Fed chair or explicitly presses for a rate cut, markets lose confidence in the central bank’s willingness to stabilize prices.
• The result: Markets face the worst combination of “higher inflation” and “uncontrollable central banks.”

▶ Step 2: The collapse of the asset market (stock and bonds)
• Bond Market Collapse (Rate Surge): When fears spread that inflation will soar again (Inflation Expectation Sentiment), investors start selling their current holdings on a large scale. (Bond Price Crash = Bond Rate Surge)
• Stock Market Collapse:
1. Interest Rate Shock: When bond rates (market rates) soar, companies’ financing costs soar, which undermines corporate profits.
2. AI Bubble Collapse: Growth stocks, especially current AI stocks, were now being valued by discounting their “future value” at “low interest rates.” When interest rates soar, this discount rate rises, causing the stock’s proper value to plummet.
3. Extinction of ‘Expectations for Perfection’: Markets drastically shift from “AI will solve everything” to “policy risk can ruin everything” pessimism, resulting in Panic Selling.

▶ Stage 3: Transition to the real economy: ‘credit crunch’ and ‘stagflation’
The worst thing Mark Zandi is concerned about is the process of this asset market crash transferring to the real economy.

① Credit Crunch:
• When the asset market collapses, there is greater uncertainty across the financial system.
• Banks and financial institutions lock their lending windows for fear of losses. (Strengthening loan screening and raising interest rates)
• Businesses are blocked from lending for operating funds or new investments, and households also find it difficult to get mortgage loans.

② Negative Wealth Effect Extinction:
• As stock and bond prices plunge, household assets (retirement funds, investments) evaporate.
• Consumers with reduced assets close their wallets and reduce consumption to the extreme.

③ Worst: Stagflationary Recession
• With the imposition of tariffs, prices are rising,
• Credit crunch and weak consumption have stopped growth and unemployment is rising,
• A typical ‘stagflation’ situation occurs.
• This is the most difficult scenario for the Fed to respond to. This is because if interest rates are raised to curb prices, the economy collapses faster, and if interest rates are lowered to revive the economy, prices soar out of control.

🐭 recap: Key concerns for Mark’s turf

Mark Zandi’s warning is “Stabbing the needle of ‘policy uncertainty’ – Trump’s tariff policy and Fed pressure on an asset market narrowly inflated by AI bubble”.

His fear of the end is not just a fall in stock prices, but a collapse in the asset market triggers a “credit crunch” that cuts businesses and households off their money lines, leaving the U.S. economy in the worst phase of a “stagflationary recession” where prices rise and growth stops.