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US stocks and US bonds are all about their hearts. VIX indicates tranquility before the storm. The next 14 trading days can be called a "minefield"
Wonderful Introduction:
A quiet path will always arouse a relaxed yearning in twists and turns; a huge wave, the thrilling sound can be even more stacked when the tide rises and falls; a story, only with regrets and sorrows can bring about a heart-wrenching desolation; a life, where the ups and downs show the stunning heroism.
Hello everyone, today XM Foreign Exchange will bring you "【XM Group】: US stocks and US bonds are all about minds, VIX indicates the tranquility before the storm, and the next 14 trading days can be called a "minefield"". Hope it will be helpful to you! The original content is as follows:
The US stock market is in self-paralyzing and is determined to be indestructible - but September always reminds: www.xmniubi.complacency is the most expensive position. There has been no 2% correction for 91 consecutive trading days (the longest cycle since mid-2024). Although the volatility index (VIX) rebounded for two consecutive days, it still weighed under the one-year average. The S&P 500 hit a record high, but this calmness is more like a pressure cooker: it is like the dead silence before the storm, the wind stopped, and the sails sagged, but the horizon raised a black tide wall.
VIX converges as if the tranquility before the storm
The next 14 trading days can be called "minefields": non-agricultural employment, distorted housing caliber CPI, and the Federal Reserve's September interest rate meetings have arrived one after another. The risk is not in a single point, but in transmission - weak employment leads to the theory of "economic slowdown", CPI disrupts the inflation narrative, Powell relies on clichés to remedy, and the option expiration trend is amplified. Once the domino falls, it will collapse faster.
But the position shows that traders still believe in "no worries": hedge funds are shorting volatility, and the non-agricultural day implied fluctuations are only 85 basis points, as if the data is absolutely unsurprising.
This is very dangerous - the low-volatility camp was helpless when the tariff news in February 2025 raided, and the yen arbitrage closed in August 2024 caused panic selling, which was a lesson for the past. "Panishment" in short selling during seasonal high-risk periods is tantamount to selling hurricane insurance when the weather is sunny.
The stock market position should not be too heavy
Stock valuation is already on the verge of thin ice: the expected price-to-earnings ratio of the S&P 500 is 22 times, and the pricing presets that the market will only rise but not fall; cash allocation bottoms out, and only large technology stocks in the market are still favored by funds.Even the bullish players on the field admitted that "holding the bullet in your hand is not afraid of falling, but waiting for a pullback." This may be a subconscious prevention of risks, and the "bullets" left in your hand may become a lucky thing. The higher the market, the narrower the fault tolerance space, and small cracks can also become fatal gaps.
Can the money-giving mode opened with the interest rate cut channel still www.xmniubi.come true?
If the Federal Reserve cut interest rates by 25 basis points in September, it is also a regular operation of the central bank. It can send a "patience" signal and make the market imagine the next rate cut. The front-end interest rate cut means that the yield curve will inevitably steeply and the long-term yield will definitely soar. By shorting long-term Treasury bonds, traders who cater to steep yields will celebrate the victory.
This is textbook-style logic, but it is also because of the "Tai Textbook". Policy has never been "the Fed only pulls the front end of the curve and allows other parts of the market to follow the trend" - and the Fed is more inclined to actively dominate the trend and control the direction. The Fed has enough "tools" in its hands, and traders are likely to underestimate the power of these tools.
Possible operations of the Federal Reserve
Looking at the Fed's balance sheet, it can be found that its holdings account for a very high proportion of medium and short-term bonds - about $2 trillion will expire within 7 years, and the maturity time exceeds 15 years is only $1 trillion. This reserves sufficient "ammunition" for radical "distorted operations" (a policy tool that reduces long-term yields by selling short-term bonds and buying long-term bonds).
If short-term bonds are sold and long-term bonds with a large increase of 20-year or above, it is expected to absorb half of the circulating market in this category. At the same time, the US Treasury Department can adjust its issuance structure, focusing on short-term T-bills and reducing long-term bond supply - supply in key areas decreases, short sellers are under pressure to increase demand in areas, and the yield curve may suddenly violate all textbook logic and turn to flattening (this is the famous Yield CurveContro (YCC) yield curve control).
Add to buy mortgage-backed securities (MBS) in moderation, “lower mortgage interest rates”, and this political dividend can be delivered directly to voters.
The Fed can also use data to "treasure" as a weapon
The inflation field is also a "battlefield", and data itself is a "weapon". The housing sub-item in CPI - Owners’ Equivalent Rent (Owners’ EquivalentRent) is not only flawed, but also www.xmniubi.completely distorted.
This data is a statistics of the amount of expected rent for the owners assuming rent for their own houses. During the period of rent rising, it will lag behind the increase in rent. Now that the actual rent has fallen, it will artificially create rent stickiness, causing the CPI to be inflated.
The alternative data series of Cleveland Fed reveals the truth: Rent inflation has returned to near normal levels. If policy makers make efforts based on actual inflation levels, and bond traders use CPI data to "derive the argument that inflation is too high and not suitable for interest rate cuts", they will lose all the money.land.
YCC yield curve control
Return curve control (YCC) is no longer a "heretic", but is one of the "unconventional tools" to be enabled.
Japan has implemented this policy, and the current government has no worries when interfering in prices in other areas (from tariffs to energy). Once upon a time, the idea of locking in long-term yields would be scorned in Washington, but since the Global Financial Crisis (GFC) and Long-term Capital Management Corporate (LTCM) crisis, we have gradually moved in this direction - each crisis weakens the taboo and the trend is becoming increasingly obvious.
In addition, accounting methods can be used to revaluate gold reserves at current prices, and the US Treasury Department's accounts will suddenly add hundreds of billions of dollars of "profits" to sovereign wealth funds and even cryptocurrency fields, which can create a "gimmick" that attracts attention and www.xmniubi.completely divert the market's attention to the yield curve.
In www.xmniubi.combination with the operation of "buying long-term bonds below the par value and selling short-term bonds near the par value", this superficial action alone can be packaged as "smart financial management" - although it is essentially smoke bombs, tricks and accruals, it will still change the flow of funds.
Stablecoins may become new tools
If regulation guides trillions of dollars into US dollar stablecoins, it will bring new demand for short-term T-bills.
The US Treasury Department can leverage this demand to issue additional short-term bonds and reduce the supply of long-term bonds - new demand is always a benign demand. If this can be used to make room for "adjusting long-term yields through other tools", the effect will be better.
At the same time, tariffs are still creating cash flow for the government, regardless of legal challenges. The new demand for front-end bonds, coupled with innovative fiscal operations, has basically been built to suppress the yield curve.
None of this is good for the dollar—but the core is: for a government www.xmniubi.committed to reconstructing the flow of trade, the weakening of the dollar is a "designed feature" rather than a "flaw" even if they do not publicly admit it.
Hint at risk, break the inertia
Enterprise market traders are betting on September to repeat last year's plot: predicting the steepening of bond yield curve, then reducing front-end exposure, reducing long-term positions, and labeling it as a "consensus."
But the premise of this expectation is that "the Federal Reserve passive action, operation alone, and limited by the conventional manual" - if the policy turns to "coordinated operations" (Feder + Treasury + accounting methods + statistical caliber adjustment), this "consensus steeper transaction" is likely to become the most crowded transaction in the market.
Opportunities are in the opposite direction: flat trading may not be the choice today, but it will be the "ambush point" tomorrow.
So, September is by no means an ordinary month, but a "test". The real question is not whether the rise can continue, but how the market will cope with the pressure if the surface calmness is broken.
In the yearBefore the bottom S&P 500 index's target of approaching 7,000 points re-entered its vision, it was www.xmniubi.completely reasonable for the stock market to experience a "sharp decline" of 5%-10%.
The key is that the market never runs in a straight line, and the most painful fluctuations are often fluctuations that traders firmly believe that “it is impossible”. At present, the market has shorted "panic" and believes that the calm in August will continue infinitely - but history will punish this mentality.
The above content is about "【XM Group】: US stocks and US bonds are all about minds. VIX indicates the tranquility before the storm. The next 14 trading days can be called a "minefield"". It was carefully www.xmniubi.compiled and edited by the editor of XM Forex. I hope it will be helpful to your trading! Thanks for the support!
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