The Global Market Is Hard To Avoid.

Debt king Bill Gross recently slammed the Federal Reserve, saying that because the central bank had little effect on boosting the economy, investors were eager to deleveraging, resulting in violent turbulence in the global market.

Bill Gross also pointed out that

and

The initial differentiation, the market turbulence, also because of the highly leveraged financial economy.

In December last year, he urged investors to make risky assets, because the While E. Coyote moment was about to approach.

Wall Street reported that it had been reported that oil prices were falling and investors flooded into the US debt market.

As of Wednesday, U.S. stocks fell more than 3%, up 11% this year, of which the S & P 500 fell below its lowest 1867 point last year, and then dropped to 1812.29, the lowest since 2014.

Nine of the 10 main sub indices of S & P 500 declined.

At present, Grosse, who works at Janus Capital Group, says that because the market is aware of the lack of momentum in economic growth and signs of economic recession in the major emerging market economies, investors are selling stocks in large numbers, leading to a collapse in share prices.

He further pointed out that

The employment oriented monetary policy model is out of date, and sometimes even has a negative impact on the stock market.

The Fed returns the interest of its $2 trillion and 500 billion assets to the Treasury every year.

That is to say, the Treasury Department issues bonds, and the Federal Reserve buys bonds, but the Treasury does not need to pay interest.

This is a hoax, but investors haven't really realized it yet.

As for whether the Federal Reserve can lower interest rates to boost the bond market and stock market, Bill Gross thinks it may be possible, but when interest rates become negative, investors and residents will basically choose to deposit cash.

So the central bank is basically at the end of the road, with limited selectivity, and investors have already realized this.

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Now that global volatility has entered the third week, the continued decline of the market and the continuous emergence of new troubles (such as the obvious worry and panic of the market for Hongkong stock market, the real estate market, and the risk of spreading risks at a greater level) caused by the recent sharp depreciation of the Hong Kong dollar not only consumed investors' ammunition, but also made the relatively optimistic and positive investors tend to be cautious and "desperate".

But at this point, we want to remind investors to maintain a relative sober and calm mind in a panic market environment.

A big premise is that there is no risk of a new round of systemic crisis in the current global market. Even though there are many risks and uncertainties, especially for emerging markets, it is still in the controllable range.

So for the developed markets that are not in turmoil and whirlpool, this round of market volatility has not caused any impact on the fundamentals, and more is still caused by panic suppression and valuation contraction.

Taking the US stock market as an example, even after the ~9% callback from the beginning of the year, the dynamic valuation of the S & P 500 index is only 16 times higher than that of the long term return to 15 times of the long-term mean, rather than entering a very extreme case.

Without the background of global turmoil, it seems to us that the short-term valuation of the US stock market has been suppressed after raising interest rates, which is also the main reason why we have emphasized the short-term negative impact of the increase in interest rates.

From historical experience, the interest rate would have brought some pressure on valuation. In the 2004 interest rate cycle, the US stock market (the S & P 500 index) also experienced a reasonable convergence of valuation from 16 times to 15 times.