Unprecedented Financial Phenomenon: Safe-Haven and Risky Assets Soar Simultaneously

Ever since the United States lowered interest rates, an unprecedented financial spectacle has emerged globally: safe-haven assets and risk assets have been rising in tandem.

Recently, safe-haven assets such as the US dollar and gold have been on the rise, while risk assets like US stocks and Bitcoin have continued to climb as well. After the US raised interest rates, we witnessed for the first time the scenario of the dollar and gold soaring together. Now, we are witnessing the synchronous rise of safe-haven and risk assets once again.

Let's start with a basic concept: under normal circumstances, the rise of safe-haven assets is due to the excessive risk of risk assets, leading to capital flowing into safe-haven assets for protection. Therefore, the relationship between the two is one of inverse growth; it is not possible for them to rise and fall synchronously.

However, since the US interest rate cut on September 18, the US dollar index has risen from 100 to 104. The COMEX gold price in New York has reached a historical high of $2,764 per ounce. Since September 2023, it has increased by about $800 per ounce.

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At the same time, everyone predicted that US stocks would crash after the dollar rate cut. But in reality, the S&P 500, Dow Jones, and Nasdaq have all set historical highs. The S&P 500 has broken through 5,800 points, the Dow Jones has exceeded 43,000 points, and the Nasdaq has broken through 18,600 points. Bitcoin, on the other hand, has risen from $372,329 at the beginning of September to the current $479,296.

Why has such a bizarre situation occurred?

Firstly, the current global financial game is in an unprecedentedly complex situation. The BRICS countries are already brewing their own SWIFT transaction system, attempting to abandon the US dollar. At the same time, if the GDP of the BRICS countries is calculated using purchasing power parity, they have already accounted for one-third of the global economy, surpassing the G7's 29%. This means that the competition and game between the BRICS countries and the traditional G7 are becoming increasingly fierce.

The G7 has also experienced an unprecedented split. During this US interest rate reduction cycle, for the first time in history, Canada, the UK, and the EU collectively cut interest rates ahead of the US. In the past, to maintain the strong position of the US dollar, other currencies had to wait until the US reduced interest rates before they could do so. The inconsistency of the G7 on this issue of interest rate reduction indicates that they have already had disagreements. Now, in the EU, the forces opposing US involvement in the EU are growing, and the far-right forces in Europe are becoming increasingly strong.

Why are risk assets and safe-haven assets rising together now? It is because the authority of the data provided by the US is increasingly being questioned, and the capital circle can hardly make judgments based on these data.

Thirdly, the US dollar hegemony is on the eve of collapse. In March 2022, the US began to raise interest rates. However, this interest rate hike cycle has already reflected the weakness of the US dollar, with an unprecedented 11 interest rate hikes, but none of the major global economies have been blown up by the US. This has already shown that the influence of the US dollar is weakening.Due to various anomalies, unprecedented financial phenomena have emerged. We are currently at a historical turning point, and in the next ten years, many of our past experiences will be overturned, as a new international financial order will be established.