The house leaks and it rains continuously at night!
Believe in American National Games and invest in the US stock index! In the past few weeks, this investment philosophy seems to be facing challenges. As of the close of 4am Beijing time today, the Nasdaq Composite Index has fallen 5.52% this week, marking the fourth consecutive decline in the index and the longest consecutive decline since December 2022.
In addition to Nvidia's 10% drop, there is actually another heavyweight bearish news coming. The Dutch government announced on Friday local time that it may be forced to stop using Facebook after the Dutch privacy regulator issued a warning about Meta. The Meta, with a total value of over $trillion in US stocks, plummeted by over 5% last night and still closed down by over 4%.
Analysts believe that from the current situation, these short-term bearish factors are not fatal factors for the US stock market. The main reason for the dual kill of US stocks and bonds is inflation, which, based on the current trend of commodity price increases, is already a problem that the Federal Reserve alone cannot solve. Economic recession and black swans may be the beginning of a downward trend in inflation and a rate cut by the Federal Reserve. The current prerequisite is increasingly similar to 2008.
Facebook, "must die"?
According to CNBC, on Friday local time, the Dutch government stated that it may be forced to stop using Facebook after the Dutch privacy regulatory agency issued a warning about Meta.
The Dutch Data Protection Agency (DPA) has issued a statement advising the Dutch Ministry of the Interior not to rely on Facebook pages to communicate with citizens if it is unclear how Facebook uses the personal data of government page visitors.
The Ministry of the Interior has previously requested the DPA to provide advice on whether the government can use Facebook pages in a compliant manner.
Dutch Minister of Digitalization, Alexandra van Hufflen, stated in a statement that the government hopes that Meta (Facebook's parent company) will clarify how they will address these concerns as soon as possible and no later than before the summer recess. "Otherwise, according to DPA's suggestion, we will be forced to stop our activities on the Facebook page."
Dutch DPA President Adelaide Wolfson stated in a statement that visitors to government pages believe that their sensitive personal information is in a secure state. In fact, this may also involve information about children and adolescents, which makes this even more important. They are easily vulnerable to attacks online and require additional protection.
A spokesperson for Meta stated that we fundamentally disagree with the evaluation supporting this suggestion, which is actually incorrect and indicates a fundamental misunderstanding of the working principle of our product. We will review all Meta products to ensure they comply with the laws of the region where we provide services, and will continue to cooperate with the government to ensure normal operation.
The DPA's recommendations further demonstrate the growing distrust between European regulatory agencies and Meta. Dutch regulatory authorities are concerned that user data may be shared with government departments on the Meta platform, but may still be monitored or accessed by security agencies and US federal agencies. In May last year, Facebook's parent company Meta was fined 1.2 billion euros for transferring data from European Facebook users to servers in the United States. The fine was enforced by the European Data Protection Board (EDPB), the EU privacy regulator. European regulatory agencies are concerned that user data may fall into the hands of US intelligence agencies. At that time, EDPB stated that this involved systematic, repetitive, and continuous data transmission, with Facebook having millions of users in Europe, resulting in a huge amount of personal data being transmitted.
A game, a crisis?
The negative impact Facebook has faced and the sharp drop in its stock price may just be a microcosm. What we need to pay attention to and closely monitor is the overall trend of the US stock market. In the past week, the NASDAQ index, represented by technology stocks, has plummeted by 5.52%. The index not only broke through daily and weekly levels, but also showed signs of increased selling on Friday.
The direct reason behind this may be related to the direction of the Federal Reserve's interest rate. In the past week, several members of the American League's voting committee spoke out, with mostly hawkish language. New York Fed Chairman Williams (Fixed Vote Committee) stated that there is no rush to cut interest rates, and the ultimate interest rate may need to be lowered at some point, but the timing of the rate cut is driven by the economy. Atlanta Fed Chairman Bostek (2024 Voting Committee, biased) stated that it is unlikely to cut interest rates before the end of the year and reiterated his expectation of a rate cut this year, with an open attitude towards rate hikes. Cleveland Fed Chairman Mester (2024 Voting Committee, biased towards hawks) stated that the Fed may cut interest rates "at some point". Board member Bauman (2024 Voting Committee, biased towards Eagle) discussed that time will prove whether the current monetary policy is "sufficient" and restrictive, implying that interest rates still need to be maintained for some time. Minneapolis Federal Reserve Chairman Kashkali (not a 2024 vote committee member, leaning towards the hawk) stated that interest rate cuts may need to wait until 2025.
The latest survey released by the Federal Reserve on Friday shows that experts believe the biggest concern facing the global financial system is that the Federal Reserve will maintain a tighter than expected monetary tightening policy. Experts are concerned that long-term high interest rates may put pressure on the balance sheets and solvency of households and businesses, thereby weakening the economic outlook. In addition, banks with higher exposure to commercial real estate and consumer loan businesses may suffer greater losses, leading to tighter financial conditions.
The Federal Reserve mentioned in its report that contacts have noted several areas of uncertainty, including trade policy and other foreign policy issues related to the escalation of geopolitical tensions. They also mentioned policy uncertainties related to the November election.
In fact, from the observer's perspective, there are currently two variables that are difficult to solve:
One reason is that due to geographical factors, commodity prices continue to rise, resulting in a pattern of commodities rising alongside the US dollar. This puts the Federal Reserve in a very awkward position;
Second, at present, the one-year interest expenditure on US treasury bond has exceeded the US military expenditure. This situation is clearly unsustainable. In the end, how will the US government address this complex issue. I believe many people have no answer. It is worth noting that when the environment becomes complex, it often leads to the emergence of super black swans. This may be an issue that investors need to worry about, or are currently concerned about.