Driven by Trump's re-election victory, U.S. stocks hit a historic high on Wednesday, with the Dow Jones index soaring over 1,500 points in a single day, while the S&P 500 and Nasdaq indices both reached new highs. However, the market's fervor concealed ongoing concerns about U.S. debt and deficits. Federal debt is nearing $36 trillion, and the Federal Reserve's interest rate hikes have raised rates, further exacerbating government deficits. Some analysts warn that this level of debt poses a severe challenge to the U.S. economy and the global dominance of the dollar, especially as the banking sector faces potential vulnerabilities.
As interest rates rise, the banking sector's "unrealized losses" have reached approximately $500 billion, with unresolved financial risks accumulating. Due to opacity, the shadow banking system outside the banking sector carries even more risk. Experts point out that asset pricing is seriously disconnected from reality, which may trigger greater instability in the financial system.
Against this backdrop, large-scale tax cuts and government spending driven by Trump's policies will increase U.S. borrowing demand, exacerbating the economic burden. Some analysts believe this situation may force the Federal Reserve to consider quantitative easing earlier to alleviate pressure on the financial system.
On the other hand, gold prices experienced a brief dip after Trump's victory, falling by more than $80 on Wednesday, mainly due to a stronger dollar. However, market observers note that this could just be a short episode in a long-term bull market for gold, as the dollar's strength may be unsustainable under U.S. debt pressure and a global de-dollarization trend. Analysts point out that the long-term solution to the deficit lies in promoting economic growth, rather than merely regulating interest rates, but given the current deficit situation, the Federal Reserve's rates may remain high.
