Since the beginning of this year, Wall Street has been continuously skeptical about the continued rise of the market. However, with Trump's return, various signs indicate that they may have been too pessimistic.

In the past five days, U.S. stocks have risen by over $20 billion, with a large amount of funds pouring into the market. Small-cap stocks and bank stocks have performed particularly well, with Bitcoin also hitting new highs.

Pure optimism is sweeping Wall Street. Trump has promised to cut taxes and deregulate to promote economic growth. This, like the Fed's loose monetary policy, will inject new vitality into an already booming economy.

Bonds are the only asset that has fallen in this round of growth, as people are worried about the cost of fiscal stimulus. However, even the U.S. Treasury yield has shown signs of decline over the weekend.$U.S. 10-Year Treasury Notes Yield (US10Y.BD)$Currently at 4.310%.

However, U.S. stock valuations have climbed to historic highs, and expectations for Federal Reserve monetary policy have shifted. Beneath the bull market frenzy, there are undercurrents of crisis.

The optimism on Wall Street is reaching a climax.

Trump's return will sweep away the gloom hovering over the U.S. stock market, and the entire market is filled with an optimistic and upward atmosphere.

This week, the computer sector of the Shenwan Index fell by 2.54%, underperforming the CSI 300 Index by 1.68 percentage points. As of Q2 2020, the holdings ratio of the computer sector in public funds was 5.34%, close to a three-year high and 0.91 percentage points higher than the standard ratio. Public fund holdings concentration further increased, with a focus on heavyweight stocks such as Yonyou Network. According to statistics of the top ten fund-heavy stocks, the total fund holdings of the computer sector in Q2 2020 amounted to RMB 93.28 billion, accounting for 5.34% of the total fund holdings, a slight decrease from the previous quarter's 5.35%, but still close to a three-year high. Moreover, since Q4 2019, the computer sector's fund holdings ratios in Q1 and Q2 2020 have been 1.20% and 0.91% higher than the standard ratios, respectively, indicating that the sector has received over-allocation from public funds. In terms of individual stock holdings, Hundsun Technologies, Kingsoft Office Software, Glodon, Yonyou Network, Sangfor Technologies, Winning Health Technology Group, Unisplendour Corporation, Shanghai Baosight Software, and Inspur Electronic Information Industry were among the top ten fund-heavy stocks in Q1, with Baosight Software replacing China National Software. Overall, public fund heavy positions in this sector have been relatively stable. Among them, Hundsun Technologies saw a significant increase in Q2 holdings, almost doubling its fund holdings compared to Q1, while Yonyou Network and Winning Health Technology Group saw significant institutional buying for two consecutive quarters. Inspur Electronic Information Industry, Meiya Pico Information and other nine companies were also top ten fund-heavy positions in Q1.$S&P 500 Index (.SPX.US)$Rises by 4.7%, hitting the 50th new high this year. $CBOE Volatility S&P 500 Index (.VIX.US)$ Setting the largest weekly decline since 2021.

$Bitcoin (BTC.CC)$ The price has broken through $75,000 for the first time.$Dogecoin (DOGE.CC)$Investment institution VanEck's Matthew Sigel boldly predicts that the Bitcoin bull market is "stronger than ever before", with the potential to reach $180,000 next year and even $3,000,000 by 2050.

Driven by the pursuit of higher returns, investors are willing to take on higher risks and invest in junk bond ETFs, even as high yield spreads hover at their narrowest levels since 2007.

Bloomberg's risk appetite index covers tracking small-cap stocks, high yield bonds, and more. The weekly inflow volume of this index has set a record since 2016 - coincidentally, the year Trump first won the presidential election. JPMorgan stated that in the days leading up to the election, retail traders' participation in the options market soared to record levels.

At the same time, senior analyst Mike Mayo is optimistic about the outlook for Bank of America, believing that the bank is going through a 'paradigm shift'.

The optimism on Wall Street is reaching a peak, and respected strategist Ed Yardeni even expressed concerns about being too conservative himself. He believes that the future will be a decade of roaring prosperity. Yardeni stated:

"The stock market has been overwhelming me. I believe we are in a bull market that will continue until the end of this century."

Amidst the bull market frenzy, there are hidden crises surging.

However, the 'rampage' of the bull market may also cause investors to overlook persisting weaknesses in the economy and other sectors.

In September, the S&P 500 index plummeted by more than 4% due to weak employment data. Last month, market anxiety intensified with the S&P 500 index briefly retreating by nearly 10%, while the VIX fear index soared to a 30-year high.

"In the long term, we may have already taken the lead," said Amy Wu Silverman, head of derivative strategies at Royal Bank of Canada's capital markets.

"In the short term, this is definitely a risk event. I believe that after Trump is elected president, the risks will be even greater."

Bond fund giant Pacific Investment Management Co (PIMCO) has issued a warning that Trump's return to power could lead to worsening inflation and overheating economy, hindering the Fed's interest rate cut process, which is a dangerous signal for the stock market.

In fact, during Trump's first term, the ROI of the S&P 500 index was slightly lower than the increase during Biden's administration, with the former always scoffing at the latter's economic policies.

After two years of robust growth, U.S. stock valuations have soared to historic highs, becoming one of the biggest risks facing the market. While Trump once touted the stock market rise as a highlight of his presidency, the current environment of high valuations has made boosting the stock market more challenging.

In addition, the market's expectations for the Federal Reserve's monetary policy have also changed, with many financial institutions lowering their expectations for rate cuts in 2025. The immigration restrictions and tariff policies implemented by the Trump administration may trigger inflationary pressures, forcing the Federal Reserve to adopt a more cautious monetary policy stance.

Editor/Rocky