Risks not eliminated, volatility first decreases! The US stock, bond, and currency markets collectively enter an "abnormal calm period."

According to Zhitong Finance APP, from the stock market, bond market to the foreign exchange market, various volatility indicators are falling to their lowest levels of the year. Data shows that the S&P 500 Volatility Index (VIX), known as the "Wall Street Fear Index," recently dropped to a new low since December last year, the global currency volatility index also hit a new low for the year, and the volatility indicator for U.S. Treasuries has retreated to early 2022 levels. This calm situation sharply contrasts with the risk-laden macro environment—geopolitical tensions, stubborn inflation, and threats from Trump to the independence of the Federal Reserve still loom, yet the market bets on limited price fluctuations. However, a deeper analysis reveals that this contradictory phenomenon is actually traceable. Mohit Kumar, Chief Economist at Jefferies International, stated that the primary reason is "a large amount of waiting capital in the market." This means that many investors are ready to buy on dips, thereby suppressing the spread of selling behavior. Secondly, the global economy is far from falling into the shadow of recession—when Trump stirred up a global trade restructuring storm in April this year, most people believed that an economic recession was inevitable, and the market experienced several weeks of severe fluctuations at that time. In fact, this U.S. president has retracted some extreme tariff threats, reinforcing investors' perception of his "loud thunder but little rain" approach. The behavior pattern, humorously dubbed "TACO" (Trump Always Caves to Opposition) by analysts, is prompting investors to enter the market for fear of missing out on an upward trend. Guy Miller, Chief Market Strategist at Zurich Insurance, stated: "Investors are watching the market rise, knowing that risks remain, yet they have to participate." It is certain that there has indeed been a brief market turbulence this month. Affected by disappointing employment data and tariff policies, the VIX index once approached 22 points during the day, but then quickly exhibited the familiar rapid decline pattern of options traders. This week, the S&P 500 index reached a new high again, and moderate inflation data strengthened expectations for interest rate cuts by the Federal Reserve, further suppressing volatility. Compared to the market's skepticism about a single rate cut at the beginning of the year, the current money market has fully priced in two 25 basis point cuts within the year, with a possibility of a third. Brendan Fagan, a strategist at Bloomberg New York, stated: "The signals conveyed by the market are almost provocative. However, we are still discussing potential stagflation, policy missteps, or unexpected shocks triggered by the White House. If these risks are real, the market seems completely indifferent. It is hard to discern whether this is a temporary calm of the 'summer lull' or..." Nevertheless, some institutions have sounded the alarm on the market's blind optimism. During Trump's first term, the VIX index fell below 10 points at the end of 2017, setting a record, only to soar to 50 points the following year. Salman Ahmed, Global Head of Macro and Strategic Asset Allocation at Fidelity International, warned that as the market enters a "potential turbulence period," investors must remain vigilant The institution believes that the probability of a cyclical recession triggered by the United States is 20%, as the impact of tariff escalation will gradually permeate the economy. Ahmed added that the continuously expanding debt burden and spending levels of the U.S. government may force the Federal Reserve to adopt unconventional measures such as yield curve control, which could distort U.S. Treasury prices and trigger market turbulence. "The U.S. is entering a phase dominated by fiscal policy, where government spending plans increasingly override monetary policy. How the Federal Reserve responds will be crucial for market stability."