Global capital is frantically fleeing the united states of america, selling stocks, bonds, and foreign exchange

As U.S. stocks plunged again after a previous day of gains on Thursday, more and more Wall Street traders are starting to wonder if Wednesday's rally in the U.S. stock market following Trump's decision to postpone tariffs was just a "dead cat jump"?

At the same time, at this another extremely volatile market point, the biggest focus in the U.S. market may still not be on stocks —— because after the collapse of U.S. debt earlier this week, new pressures seem to be emerging:

Not only is the 30-year Treasury yield starting to move back toward the 5% mark, but the dollar has suffered a rare precipitous plunge, quickly breaking the 100 mark in early trading on Friday...

U.S. stocks, bonds and the dollar were sold off again on Thursday amid fears of a global recession as U.S. President Donald Trump's erratic trade war, aimed at preventing a financial market meltdown, was less than 24 hours old, data showed.

Due to investors taking advantage of Wednesday's historic rally for high selling, the S&P 500 closed down 3.5% on the day. The Dow Jones Industrial Average also fell about 2.5%, dropping 1,014.8 points for the day. Specifically, the seven tech stocks that saw the biggest gains on Wednesday all plunged sharply on Thursday: Tesla shares fell 7.3%, NVIDIA shares dropped 5.9%, and Meta Platforms fell 6.7%. Stocks related to economically sensitive companies were also hit hard. The Russell 2000 Index, which tracks small-cap performance, declined 4.3%.

The collapse of long-term Treasuries sent yields soaring again after a brief respite, with the 30-year yield rising back to 4.93% in early Asian trading on Friday, again moving toward the 5% mark.

The dollar also plunged for a third straight day, with the ICE Dollar Index falling below 100 for the first time on Friday morning to 99.66, its lowest level since July 2023. The reason was that traders liquidated U.S. assets and turned to other safe-haven currencies such as the Swiss franc, which posted its biggest gain in a decade on Thursday.

Meanwhile, traders flocked to traditional safe-haven assets. Gold futures jumped to a record $3,221 an ounce in early trading on Friday.

(Gold has had its biggest rally since the outbreak)

Is global capital starting to flee the US?

There is no doubt that the crisis facing US financial markets, which eased for just one day after Mr Trump's "compromise" announcement on Wednesday to suspend reciprocal tariffs on dozens of countries for 90 days, appears to have intensified.

As the well-known financial blog zerohedge points out, just a quick look at the following three images will tell you why the U.S. market is starting to get nervous.

① The world is increasingly aware of America's sovereign risk

Us one-year sovereign CDS have recently soared, and rising CDS costs typically reflect a market panic about credit risk, with investors starting to seek hedging mechanisms. At present, US CDS trading is almost as bad as Italy and Greece.

② The unwinding of Treasury basis trading is far from over

Swap spreads show that the dollar funding market is in trouble again after a quick easing yesterday...

③ The dollar is collapsing fast

The Bloomberg Dollar Index has been on a downward trend after falling below its 200-day moving average

Renowned economist Peter Schiff stated, "I have never seen U.S. assets suffer such a massive sell-off. The dollar, bonds, and stocks have all taken a beating. I don't remember the last time the dollar fell 3.5% against the Swiss franc in a single day. America's ride on the global coattails is coming to an abrupt end. Fasten your seatbelt."

In fact, since Trump announced his plan to impose punitive tariffs on dozens of U.S. trading partners, the recent volatility in U.S. stocks and bonds has been comparable to that seen during the pandemic and the 2008 financial crisis, which speaks volumes about the extent of market volatility.

All of these developments ultimately point to the same sobering conclusion: Trump's chaotic tariff measures, whatever the outcome, are rapidly eroding confidence in the U.S. economy and could put markets on edge for the next three months as traders anxiously await how it will all play out.

Smead Capital Management Chief Investment Officer Bill Smead said, "All of this will soon be over —— The likelihood that we will soon return to happy days is very, very low. This could be the beginning of a big bear market."

This fear reflects a dramatic shift in market sentiment less than three months into Trump's second term. —— Wall Street had bet that his policies of tax cuts, deregulation, and boosting economic growth would sustain the stock market bull run. But as Trump fired tens of thousands of employees, withheld federal aid, and unilaterally rewrote international trade rules, these expectations quickly turned sour.

More worrying than the tariffs themselves is Mr Trump's approach to policymaking: erratic policies, unconventional pricing formulas and non-traditional targets. This makes it difficult for Wall Street analysts to predict what will happen, let alone assess its ultimate impact on equity, bond and commodity prices.

Is the world moving away from the dollar?

"Even in emerging markets, we know what their policies are. But in the US, we can no longer do fundamental analysis on some of the best companies," said Kim Forrest, chief investment officer and founder of Bokeh Capital Partners

Since Trump announced the latest tariffs in the White House Rose Garden, the market has experienced a heart-stopping six trading days. The initial shock triggered a deep sell-off in U.S. stocks, wiping out over $10 trillion in market value. Then, from New York to Tokyo, from Sydney to London, the sell-off in U.S. Treasuries plunged global bond markets into turmoil. Now, it is the turn of the dollar to be the new target of the plunge.

In a new video released on Thursday, Peter Schiff said Trump's tariffs were not only ineffective, but were backfiring by increasing the trade deficit and undermining American competitiveness. He warned that "the world is moving away from the dollar."

Shive also highlighted the root cause of America's persistent trade deficit, emphasizing the lack of savings and investment in the United States. He argued that excessive domestic spending and underinvestment have led to America's over-reliance on foreign producers. The United States has had to rely on overseas factories to produce goods it cannot produce itself.

Despite Schiff's appreciation of Trump's goal to cut the budget deficit, he predicts that tariffs will have the opposite effect. "Tariffs will not address the weaknesses in the U.S. economy; instead, they will impose additional burdens on American consumers and businesses, which are paid for by Americans, not by U.S. trading partners —— there is no external revenue, everything comes from within. And 'raising taxes' on ordinary Americans will further strain an already weak economy. Therefore, the U.S. will face more severe stagflation."

Mr.Schiff warned of the fragility of the U.S. financial system, stressing that the United States relies on foreign capital to maintain unsustainable living standards.

He predicts that this dependence will end in pain, as a weaker dollar will force Americans to spend less and accept lower living standards.

"It's the US that's taking advantage of the world, because we live beyond our means on global resources. But other countries in the world can only support our extravagance by cutting back on their own consumption, and that model is about to change."

Shiff pointed out, "Change is inevitable because the dollar will depreciate significantly. At that time, consumption in the United States will shrink while consumption in other countries will grow. In this way, the trade deficit will disappear as living standards in the U.S. decline. The world is currently accelerating its selling of dollars, which is precisely laying the groundwork for the impending major currency devaluation."