Understanding the Comparison of Previous Withdrawals in the US Stock Exchange and Future Rehearsals (Deep Reflection) First, let's talk about the possibility judgment of three scenarios occurring one ️⃣ Decline scenario, including stagflation (probability 65%) The rise of inflation is a highly probable event, whether it is caused by tariff conflicts leading to price increases (more importantly, increasing people's expectations of inflation), or the base period effect (starting from June 2024 when inflation began to decline, causing pressure for a year-on-year increase in inflation starting from June this year), both are facing pressure for inflation to rise this year Higher inflation will suppress the interest rate reduction space of the Federal Reserve, and the long-term high yield of US treasury bond bonds will continue to be maintained. It is no surprise that the real economy will decline after enduring high interest rates for nearly two years, thus forming stagflation, or even mild to moderate recession. two ️⃣ No recession occurs (probability 35%) The fundamental reason for the decline in the US stock market is still market participants (mainly institutions) 'expectations of the economy. They believe that the probability of a recession is very low, less than 5%, which corresponds to a valuation of 20000 points for the Nasdaq. Therefore, now that the expectation of a recession has risen to 30%, it corresponds to 15000 points. Interestingly, Trump achieved this feat by relying on personal charm when the economic fundamentals have not declined significantly (hard data, such as non-agricultural employment, corporate profits, etc.). It is a "man-made disaster". Since it is a man-made disaster, it is possible for Trump to remove these measures to suppress the market after achieving its goal, then the market will naturally raise the valuation. In addition, favorable policies such as tax cuts have not yet been implemented, and more proactive policies can be expected before next year's midterm elections. Indeed, changing policies may cause a contraction in entrepreneurial investment, leading to a real economic downturn, which means that Trump may "get away with it". This probability also exists, and we can only closely monitor changes in the fundamentals of the US economy and take one step at a time. three ️⃣ Severe recession scenario (low probability) The previous two severe recessions (the Great Depression and the subprime mortgage crisis) were both related to the decline in the balance sheets of residents and businesses. The problem this time is government debt, not resident and corporate debt. The difficulty of handling government debt is to some extent more flexible than that of resident enterprises (the former can control currency issuance), and in history, the US government has also "relatively successfully" dealt with debt problems, such as the Nixon administration decoupling the exchange of the US dollar and gold in 1971, causing the US dollar to depreciate significantly against the yellow gold (at that time, one ounce of gold was equivalent to 35 US dollars, and the current price is 3000 US dollars, which is equivalent to a depreciation of nearly 99%), thus solving the problem of foreign debt. Nowadays, debt issues can also be addressed through the depreciation of the US dollar, namely the launch of version 2.0 of the Plaza Accord. Therefore, I believe that tariffs are more of a way to exert pressure, ultimately to force the currencies of major surplus countries to appreciate against the US dollar and solve the debt problem Then the thinking and tool base of the Federal Reserve to deal with the crisis also changed greatly. During the Great Depression, the Federal Reserve once responded with the traditional "fiscal balance" thinking, did not launch stimulus policies, and believed that recession was a normal clearing of the economic foam, leading to a painful lesson. During the subprime crisis, although there was a subjective willingness for stimulus policies, the timeliness was compromised due to the incomplete tool library. So far, from the impact of COVID-19, it can be seen that the problem with the Federal Reserve's stimulus policy lies in "overstimulation". Therefore, I personally believe that the probability of a crisis similar to the Great Depression or subprime mortgage crisis occurring this time is very low, and it is not practical to carve a boat and seek a sword. ---------------------- 🤔 A little personal extension thinking: The United States does have the power to reshape the world trading system because it has the world's largest consumer market and the ability to restructure supply chains on a large scale. But reshaping the trade system is very difficult, and the biggest challenge is rebuilding the industrial chain. Rebuilding the industrial chain takes time, whether it is returning to the United States or transferring to other countries. During this period, American society will inevitably be greatly impacted, especially those who benefit from the existing global interest structure. Under the democratic political system, they will strongly obstruct and oppose current policies. So I think the biggest question is not whether the United States has the strength, but whether the Trump government can withstand the economic fluctuations and the huge pressure brought by them, whether it can persuade the majority of the people to continue to support it, and whether it can continue to win in the next election to maintain the continuity of policy. That is to say, American society must reach a long-term consensus on this issue and be able to continue to push forward, because doing anything big takes time. ---------------------- In the end, without conducting an objective analysis, the brothers exaggerated the severity of the crisis and blindly optimistic about the other extreme, which I believe do not belong to rational decision-making and are noise that interferes with investment behavior. After spending some time learning about economics and finance in recent years, I feel that I have a more systematic and comprehensive approach to problem-solving. I now understand many things that I couldn't understand before. In fact, if many practical problems are detached from the economic dimension and only talk about systems and ideology, they will feel hollow and unable to be analyzed and explained correctly.