Stock Investment
What Recent Market Movements Mean
The capital markets since June 2026 have left many feeling bewildered. For the first half of the year, the AI sector soared, driving asset prices higher. However, the past week has seen a rollercoaster ride of volatility, with global risk assets experiencing dramatic ups and downs. Many attribute this correction simply to a policy adjustment by the Federal Reserve, but in reality, a host of macroeconomic undercurrents have been overlooked by the market.
What is the underlying context of this global market volatility?
The core issue is extreme K-line divergence combined with a valuation restructuring in the AI market.
In the first half of 2026, the global market exhibited a typical K-line pattern: the AI sector experienced a bull market, while other assets traded sideways or weakened. Over the past six months, funds almost blindly flocked to popular sectors like AI hardware and semiconductor memory, pushing valuations and trading congestion to their limits.
However, the market completely reversed in June, with the AI sector and global risk assets experiencing synchronized and dramatic fluctuations. As of June 15th, market sentiment only briefly recovered thanks to the positive news of a potential US-Iran agreement.
What are the core microeconomic and liquidity-related factors driving the sharp market correction?
This round of deep adjustment is a complex combination of four factors: congested trading, leveraged funds, increased supply, and policy transition. None of these can be omitted.
Expectations of a marginal tightening of Federal Reserve policy.
Recent US employment and inflation data have shown greater resilience than expected, leading the market to completely revise its expectations for interest rate cuts, shifting from "a rate cut this year" to "no rate cut, or even a possible rate hike." While this may seem like a minor adjustment, the AI hardware and semiconductor memory sectors are currently experiencing extremely congested trading, heavily leveraged funds. Even a slight change in expectations can trigger a stampede of selling. Furthermore, the semiconductor memory sector's profits have reached a cyclical high over the past six months, leading to a massive influx of leveraged ETF funds, mirroring the previous leveraged two-way volatility seen in gold and crypto assets.
Severe oversupply of technology assets.
Global AI capital expenditure is entering a period of explosive growth. In 2026, major US tech companies' AI capital expenditure is projected to exceed $800 billion, soaring to $1.2 trillion in 2027. Corporate cash flow simply cannot sustain operations, forcing them to engage in large-scale financing. Calculations show that US tech giants will raise as much as $500 billion in bonds over the next year. Coupled with stock offerings and large IPOs, the market asset supply will expand instantly, creating a strong capital drain effect and a complete imbalance between supply and demand for risky assets.
Disruptions from the Fed's leadership transition.
Historical patterns show that during the transition period after a new president takes office, the market actively tests the new policy tone, directly amplifying two-way fluctuations in interest rate.
Fed policy expectations have completely reversed;how will the subsequent tone be set?
In short: previous rate cuts were a policy deviation; the current phase is a complete return to a prudent and slightly tight monetary policy.
The previous Fed chairman's significant rate cuts, placed against the backdrop of high sticky inflation and a sound economic fundamentals, have been perceived by the market as an excessively loose policy deviation.
Currently, the Fed has no room for further rate cuts in the short term. The June policy meeting will directly remove all dovish statements, formally establishing a prudent monetary policy tone. In the long term, two core factors will continue to limit the scope for easing: first, the ongoing geopolitical conflicts in the Middle East will continue to drive imported inflation; second, the high-intensity global capital expenditure on AI will continue to raise price levels. Coupled with the strong resilience of the US labor market, which fully supports the new chairman maintaining a relatively tight policy, the Federal Reserve has officially entered a phase of policy shift.
What is the outlook for US stocks? Where are the short-term risks?
There is no need to be pessimistic in the medium to long term; the short-term pullback is a healthy technical adjustment.
The overall upward trend of US stocks is clear over the next 6-12 months, with the S&P 500 expected to reach 8000 points by the end of the year. The core support is the high growth of the AI sector and the strong certainty of corporate earnings.
However, short-term risks will be concentrated in the coming weeks: the implementation of the Fed's new policy, the Bank of Japan's interest rate hike, the ongoing geopolitical tensions in the Middle East, the 10-year US Treasury yield breaking through 4.5%, and the 30-year US Treasury yield breaking through 5%. Coupled with the traditionally slow trading season for US stocks in July and August, market volatility will remain high. Focus on effective position management.
