(check chinese verson and do translate so that you can see my chart..)

Risk assets weakened this week, primarily due to concerns about AI valuations and hawkish comments from the Federal Reserve. The three major U.S. stock indices fell 5.5-8.5% from their recent highs, with short-term technical signals bearish and one-month implied volatility reaching a monthly high (see our SPX vs. VIX chart). Nvidia's strong earnings and optimistic comments from its CEO failed to reverse the negative trend, with investors questioning whether the AI ​​leader's investment commitments exceeded its financial and manufacturing capabilities. If AI concerns persist, a significant rebound in risk assets is unlikely.

Cryptocurrencies fared even worse, with Bitcoin falling below the psychological level of $90,000, hitting a low of around $83,000, a 35% drop from its all-time high of $126,000. This week's 18% plunge marks its worst weekly performance since mid-November 2022; November is on track to become the worst monthly month since June 2022.

The Fed's hawkish stance exacerbated risk aversion, reducing the probability of a December rate cut from 90% to 27%. The FOMC meeting minutes confirmed a hawkish tone, emphasizing that unclear data hinders further easing. Next week's US data schedule is adjusted, with PCE inflation data being crucial; a weaker figure could boost expectations of a rate cut and support risk sentiment. Consumer confidence is also key, potentially reflecting weak spending leading to slower GDP growth in the fourth quarter.

What will happen next week? Federal government funding has been extended to January 30th, leaving the risk of a shutdown. Next week's shortened Thanksgiving holiday, with markets closed on Thursday and closing early on Friday, will likely limit market volatility due to low liquidity. Trade tensions and geopolitics will be variables next week. The US stance on exporting chips remains unclear, potentially leading to export restrictions on China; the "Gain AI" bill, if passed, will prioritize domestic customers, potentially triggering Chinese retaliation. While the US-mediated peace agreement between Ukraine and Russia leans towards Russia and has been criticized by Ukraine, negotiations may resume; successful progress would boost risk sentiment but weigh on gold (falling towards $4,000, challenging a low of $3,886) and oil prices (testing a five-year low of $55.60). If negotiations break down, Ukraine may attack Russian oil and gas infrastructure, potentially causing oil prices to rebound.

The US dollar strengthened amid risk aversion this week, with EUR/USD testing 1.1500. Eurozone news was quiet; the ECB meeting minutes are expected to confirm a pause in interest rates, with focus shifting to German inflation data. Barring major surprises, the final ECB meeting in 2025 will likely be merely a formality. The pound is under pressure; Chancellor Reeves will announce the 2026 budget on November 26, focusing on increased tax revenue to fill a £20 billion fiscal gap. A heavier tax burden could trigger a government crisis, push up government bond yields, and depress the pound; a light tax burden would be seen as a lack of resolve, equally unfavorable. GBP/USD could fall to a low of 1.2707. The probability of a BoE rate cut in December is 82%, and the budget response could accelerate subsequent easing. The yen remains weak, with USD/JPY touching 157.88, approaching the high of 158.66 and the 160 level, increasing the risk of intervention. Central Bank Governor Ueda's signals were mixed, and Prime Minister Takashi announced a $135.3 billion stimulus package. A rise in Tokyo's CPI next week might slightly support the yen, but it's unlikely to reverse the trend. In a low-liquidity environment, the opportunity for central bank intervention increases. Neighboring currencies such as the Australian dollar, New Zealand dollar, and Canadian dollar fell sharply against the US dollar this week; next week's Australian CPI, RBNZ meeting, and Canadian third-quarter GDP are expected to provide a rebound opportunity. The Australian dollar has the most potential to benefit from a weaker US dollar, while the New Zealand dollar is the weakest, as the RBNZ maintains its aggressive easing stance.

Overall, risk sentiment next week will depend on US data, geopolitical developments, and the UK budget; a weak dollar requires improved risk appetite and weak data support. A peace agreement is pushing down oil and gold prices, but its failure could reverse the bear market (please pay attention to newsfeed real-time updates; service has been fixed and will resume on Monday).

Which sectors should you watch for strong stocks?

This is the sector performance matrix from Thursday. That day, I mentioned observing which stocks were still rising/slightly falling during a major market downturn.

Observing ZS Live (Z-score live, i.e., daily price %/annualized volatility), you can see that biotech and consumer staples are among the few in the red.

During the market rebound on Friday, you'll see that traditional economic sectors are the most negative; when the market bottoms out, buy them!

Important US Stock Earnings Next Week: Next week coincides with the Thanksgiving holiday (market closed on November 27th, trading closes on the morning of November 28th), so there will be relatively few earnings releases, mostly concentrated from Monday to Wednesday. Focus on companies in the technology, retail, and equipment manufacturing sectors, as these companies often have a significant impact on market sentiment. {Release Date (AMC: After-Hours, BMO: Pre-Hours)}

There are no major earnings announcements scheduled for November 27-28 (Thursday to Friday), and market liquidity is low.