The logic behind the shattering of the myth of the US stock market

Once upon a time, the US stock market was a shining pearl in the global capital market, with the S&P 500 index, Nasdaq index, and other indices reaching new highs, becoming a popular investment destination for global investors, and the "US stock myth" deeply rooted in people's hearts. However, in recent times, the US stock market has been plunged into sustained turbulence and decline, and the myth is gradually shattered. The logic behind it is worth further analysis.

From a macroeconomic perspective, the slowdown in US economic growth is an important underlying factor that led to the collapse of the US stock market myth. Since February 2025, several key economic data in the United States have shown weak performance. The consumer confidence index hit a new low since 1995, the service sector PMI data unexpectedly shrank, and inflation expectations soared to a 30-year high, undoubtedly dealing a heavy blow to the illusion of a "soft landing" for the US economy. From the perspective of consumption, the growth rate of retail sales and actual personal consumption expenditure in the United States in January was significantly lower than expected, and the proportion of credit card loans overdue for more than 90 days reached a new high since 2012. This reflects that the consumption ability and willingness of American consumers are declining, and consumption, as an important engine of economic growth in the United States, its insufficient power will inevitably drag down the overall economy.

The poor economic data has also changed the market's expectations for the direction of the Federal Reserve's monetary policy. The weak data has led the market to bet that the Federal Reserve will cut interest rates by 44 basis points this year, and September may become a policy turning point. However, the contradiction is that the Federal Reserve is still in the stage of reducing its balance sheet, which goes hand in hand with interest rate cuts, intensifying the pressure on the depreciation of the US dollar. On the one hand, the depreciation of the US dollar will reduce the actual returns of foreign investors holding US stocks, prompting them to sell them; On the other hand, changes in market expectations can lead to changes in the flow of funds, causing investors to reduce their allocation to US stocks and instead seek other more attractive investment targets, accelerating the outflow of funds from US stocks and impacting the US stock market.

Looking at industrial development and enterprise level again. The technology sector, which once led the bull market in the US stock market, has now encountered many problems. Taking Tesla as an example, as a star company in the fields of new energy vehicles and technology, its stock price once soared, but recently it has been in constant trouble. Tesla is frequently questioned on product quality, and vehicle recalls occur from time to time, involving auto drive system failures, battery safety hazards and other aspects. In terms of market competition, the global new energy vehicle market is becoming increasingly fierce, with many traditional and emerging car companies making efforts to continuously launch more competitive products, squeezing Tesla's market share. From the perspective of performance, Tesla's profit growth has not met market expectations, revenue growth has slowed down, and cost control is facing challenges.

From the perspective of market sentiment and investor behavior, the long-term bull market in the US stock market has led to excessive optimism among investors, resulting in the accumulation of a large amount of speculative funds in the market. With the deterioration of economic data and lower than expected business performance, this optimistic sentiment quickly reversed. Investors began to reassess the investment risks of the US stock market and sold off their stocks, triggering a market frenzy. According to data from Goldman Sachs' stock sales and trading department, hedge fund selling has intensified, with the fastest pace of short selling since November 2024. Long term investors have also sold a net $5 billion, with the selling mainly concentrated in the technology, finance, and optional consumer sectors. This large-scale selling behavior further exacerbated the decline of the US stock market, forming a vicious cycle.

In addition, policy factors have also had an undeniable impact on the US stock market. After Trump took office, he wielded the stick of tariffs, and the uncertainty of his trade policy brought huge risks to the US economy and the US stock market. On the one hand, tariff policies may lead to an increase in raw material costs for American companies, hinder exports, compress profit margins, and affect their profitability; On the other hand, trade frictions can cause instability in the global economy, disrupt the stability of global industrial and supply chains, and ultimately affect the competitiveness of American companies in the global market. Investors are concerned that the imposition of tariffs between the United States and other countries will escalate global tensions and lead to a recession in the global economy. As a result, some investors have chosen to withdraw from US stocks in search of safe haven funds.

The collapse of the myth of the US stock market is not accidental, but the result of multiple factors such as macroeconomics, monetary policy, industrial development, market sentiment, and policies. For global investors, the shattering of the myth of the US stock market serves as a warning that investment risks are everywhere, and also reminds everyone to evaluate the investment environment and investment targets more rationally and comprehensively; For the US economy and financial markets, how to deal with the chain reaction caused by the decline of the US stock market and avoid the economy falling into recession will be the severe challenge they will face next.