The current trend of the U.S. stock market has become very peculiar; every time there is good economic data, the stock market experiences a decline.

Last night, the U.S. Department of Labor released the latest non-farm employment data for January. The impressive figures proved that the U.S. economy remains robust, and the job market remains tight. However, unexpectedly, the stock market saw a significant shift from rising to falling, with the Dow Jones Industrial Average dropping by more than 300 points at its peak.

What exactly is the U.S. afraid of?

01, U.S. stocks plummet by 300 points

During the day yesterday, when Asian markets closed, most countries' stock markets were in an upward trend, with only A-shares and Hong Kong stocks experiencing a slight decline.

Then, when the European stock markets opened, although they initially fell, they gradually rose afterward. Ultimately, the German stock market narrowed its losses, closing down by only 0.2%, while the French and British stock markets rose by 0.9% to 1%, respectively.

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The market appeared calm.

However, the release of the January non-farm employment data last night instead filled investors with concern about the future.

For a while, investors' sentiments were leaning towards optimism, mainly because several U.S. inflation figures had retreated from their previous highs. As a result, investors believed that the Federal Reserve would soon end interest rate hikes and might even cut rates in the second half of this year.

It was this optimistic sentiment that propelled the NASDAQ index to rise by 14.7% year-to-date, and the S&P 500 index's increase also reached 7.7%.02, Concern

However, the employment data released last night indicates that the U.S. labor market remains relatively tight, with ongoing pressure for wage increases, which could lead to fluctuations in future inflation.

Morgan Stanley's strategists also share the same view, believing that investors should not oppose the Federal Reserve. Those who do not believe that the Fed will continue to maintain high interest rates will ultimately suffer investment failures and severe losses.

After just completing a 25 basis point rate hike, the Fed believes that although the current inflation data looks somewhat favorable, it has only slightly decreased from last year's peak but is still at an absolute high compared to the past 40 years, far from the Fed's target range. Therefore, even though the Fed has reduced the rate hike magnitude, it has not yet reached an appropriate restrictive interest rate level.

Even if rate hikes are halted in the future, the Fed will still need to maintain higher interest rates for a period.

JPMorgan's strategy analyst, on the other hand, reminds investors from another perspective that he believes the current valuation of U.S. stocks is still too high, and future prices will experience a more significant correction. On the other hand, as the economy is heading towards a downturn and corporate earnings are declining, this further inflates valuations, which is clearly very unfavorable for U.S. stocks.

03, Capital Flight

In the latest data on international capital flows for November released by the U.S. Treasury Department, we can see that international capital was still flowing into the U.S. market at that time.

Throughout November, foreign investors newly purchased U.S. dollar-denominated securities assets amounting to as much as $210 billion, with the main investors in U.S. stocks coming from the United Kingdom and Canada, accounting for 95% of the net foreign purchases.

Due to the appreciation of the U.S. dollar, the U.S. has enjoyed the benefits of dollar repatriation.However, due to the data released by the U.S. Department of the Treasury with a two-month delay, the latest available data is from last November, which cannot reflect the current situation.

It was after November of last year that the U.S. dollar index began a frantic decline, and the signs of international capital continuously flowing out of the U.S. market became increasingly evident.

Recently, as the U.S. stock market rebounded, more and more funds have been flowing out of U.S. stocks and into money market funds, with a continuous increase of over $110 billion in money market fund shares for four weeks before the end of January.

Since the Federal Reserve has halted the printing press, the U.S. is currently most concerned about the continuous outflow of funds, but it appears that this trend is only intensifying.