The current market is at an extremely dangerous and divided moment.
According to the Chasing Wind Trading Desk, on December 4th, research from Southwest Securities shows that since 2023, global major asset pricing has entered a new &#34;fiscal dominance&#34; phase, where the traditional macroeconomic transmission logic has basically failed. The market is exhibiting a severe &#34;K-shaped divergence&#34;: U.S. stocks continue to rise despite a decline in employment, gold has reached new highs in a high real interest rate environment, and various asset pricing has generally embedded a &#34;fiscal risk premium.&#34;
The core risk does not stem from the economic cycle itself, but from temporarily hidden fiscal pressures. Calculations show that the current system implies an interest rate gap of up to 600 basis points. Before macroeconomic control is lost, fiscal risks are temporarily concealed in the extreme rise of gold, and the future release and convergence of this risk tension will mainly rely on the path of &#34;gold falling, copper rising, and interest rates down&#34; for marginal alleviation.
This means that investors need to pay attention to the relative changes in gold, copper, and interest rates, using them as key indicators for measuring the release of systemic risk. Asset prices have shown a &#34;dual consistency&#34; structure: On one hand, U.S. stocks and gold jointly hedge against fiat currency credit risk; on the other hand, the mild divergence between stocks and bonds reflects the costs and benefits of fiscal expansion.
<h2>Collapse of the Old Order: A Major Shift in Pricing Paradigm Post-2023</h2>
Since 2023, the market has completely broken the pricing logic of 2000-2022. Southwest Securities believes that traditional macro anchors have failed:
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1. U.S. stocks decoupled from the economy: The S&amp;P 500 index continues to reach new highs against the backdrop of a continuous decline in job openings (JOLTS), and the market has become desensitized to recession signals.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/be08104d-e0db-43c2-b7c6-893108ef0eff.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/be08104d-e0db-43c2-b7c6-893108ef0eff.png"/>
2. Gold decoupled from interest rates: Gold completely ignores the suppression of high real interest rates, showing an independent trend that even diverges from TIPS (Treasury Inflation-Protected Securities).
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c1b300ab-56f4-4fde-a50d-98c087df973a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c1b300ab-56f4-4fde-a50d-98c087df973a.png"/>
3. Copper decoupled from inflation: As a proxy variable for inflation expectations, copper prices no longer closely follow traditional inflation logic.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d8f0ca0b-46d4-4ea0-9d89-4c356efcf81c.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d8f0ca0b-46d4-4ea0-9d89-4c356efcf81c.png"/>
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This divergence is not temporary market noise, but a fundamental change in underlying logic: The core anchor point of market pricing has shifted from &#34;economic fundamentals and monetary cycles&#34; to &#34;debt sustainability and fiscal risk.&#34; The prices of every asset class now have to account for the high &#34;fiscal risk premium.&#34;
<h2>Quantitative &#34;Madness&#34;: Extreme Deviations Up to 400%</h2>
Data does not lie. Southwest Securities has precisely quantified the current market distortion level through regression backtesting of the old framework model:
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U.S. Stocks and Interest Rates: The deviation of both from the old model is astonishingly consistent, around 140%-170%.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/6a9e52cb-83ec-4723-8eb2-0628c000e19a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/6a9e52cb-83ec-4723-8eb2-0628c000e19a.png"/><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/be480bac-09ee-4d2d-b082-05d20c0b9927.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/be480bac-09ee-4d2d-b082-05d20c0b9927.png"/>
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Gold: Exhibits the most extreme &#34;decoupling&#34; characteristics, with a deviation exceeding 400%.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/86f6376b-4f86-4dec-ae28-d069ac3f8dde.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/86f6376b-4f86-4dec-ae28-d069ac3f8dde.png"/>
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Copper: The deviation is relatively mild (about 44%).
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/036c08c8-4b6c-405a-ade2-d2bcea1efa4b.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/036c08c8-4b6c-405a-ade2-d2bcea1efa4b.png"/>
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</ul>
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These data reveal a core fact: in the early stage of fiscal dominance, the U.S. fiscal risk premium is primarily priced through the extreme rise of gold, rather than directly impacting nominal interest rates. In other words, gold alone bears the responsibility of hedging against the credit denominated in U.S. dollars.
<h2>The Hidden 600bp Gap and Interest Rate Model</h2>
Southwest Securities decomposes interest rates into functions of gold (implied TIPS) and copper (implied inflation expectations), discovering a shocking gap.
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Model Calculation: Since 2022, the maximum deviation between nominal interest rates and &#34;gold-copper implied rates&#34; has reached 660bp.
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Mechanism Analysis: For every $1 increase in gold, it represents a 0.2bp decline in implied rates (fiscal risk premium rises); for every $1 increase in copper, it only alleviates the risk by 0.0225bp.
</li>
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Conclusion: Even if nominal interest rates on U.S. Treasuries do not soar, the fiscal risk has already exploded. The current interest rate level is extremely distorted compared to the gold-denominated system. To ease this enormous tension in the future, mathematically, there are only three paths: a decline in gold prices, an increase in copper prices, or a significant decline in nominal interest rates.
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</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7ccbe1ff-b9af-4bce-9ecf-a6dfa3265c4f.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7ccbe1ff-b9af-4bce-9ecf-a6dfa3265c4f.png"/>
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<h2>&#34;Parallel Universe&#34; in the Gold Coordinate System: U.S. Stocks Have Become Gold-like</h2>
Southwest Securities pointed out that if we abandon the dollar perspective and enter the &#34;gold coordinate system,&#34; the world will return to &#34;normal&#34;:
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<ol>
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U.S. stocks return to rationality: U.S. stocks priced in gold (stock-gold ratio) have not deviated from employment data (R2 reaching 77%), and the gap has significantly narrowed.
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Dual consistency: U.S. stocks and gold have shown an extreme deviation of about 430% relative to the TIPS model. This proves that U.S. stocks have actually transformed into a &#34;quasi-gold&#34; asset against fiat currency depreciation, with the market treating U.S. stocks, primarily tech stocks, as long-term assets to hedge fiscal risks.
</li>
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The tacit understanding between stocks and bonds: The approximately 150% deviation on both ends of stocks and bonds represents a distribution of interests—interest rates bear the supply costs of fiscal expansion, while the stock market enjoys the nominal profit dividends of fiscal expansion.
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</ol>
</blockquote>
<h2>Three Possible Evolution Paths in the Future</h2>
The implied fiscal risk premium will not disappear into thin air; it will only transfer between different assets. The possible macro paths in the future are as follows:
<blockquote>
<ol>
<li>
Mild recovery (short-term probability is high): The market continues to remain in the illusion of the &#34;gold coordinate system.&#34; As long as inflation expectations are suppressed, U.S. stocks are supported by AI narratives, gold, stocks, and interest rates maintain a K-shaped divergence, waiting for copper prices to catch up and repair the gap.
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Out-of-control inflation (political shock): If political pressure arises due to a &#34;crisis of affordability&#34; (such as the Trump administration being forced to implement tariff refunds or other forms of cash distribution), inflation will rise again. This will force fiscal risks from being hidden to becoming explicit—the result will be soaring interest rates, a depreciating dollar, gold pricing stepping up another level, while risk assets come under pressure. <img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8e1176d8-3edd-4cba-9d18-38fc0e15f1ad.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8e1176d8-3edd-4cba-9d18-38fc0e15f1ad.png"/>
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Recession and liquidation (liquidity crisis): If deteriorating employment data triggers recession trades, it may replicate a global liquidity squeeze similar to the yen carry trade reversal. However, under fiscal dominance, the safe-haven attribute of U.S. Treasuries is marginally weakened, limiting the downward space for interest rates, which may lead to a double whammy for stocks and bonds.
</li>
</ol>
</blockquote>
In addition, the strength of the dollar does not stem from the health of U.S. finances, but rather because non-U.S. economies (such as France and the UK) have exposed fiscal risks earlier, which is a structural strength in a &#34;race to the bottom&#34; game

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SWSC believes that the current market is in a dangerous and divided moment driven by "fiscal dominance," where traditional macro logic has failed, and U.S. stocks and gold have both become tools to hedge against fiat currency credit risk. SWSC's analysis points out that the market implies an interest rate gap of up to 600 basis points, with fiscal risk currently priced in by the extreme rise of gold; the future release of this risk will rely on a path of "gold falling, copper rising, and interest rates declining" for marginal alleviation, and investors should closely monitor the relative changes among these three

- The market is currently in a dangerous and divided phase, with a new "fiscal dominance" stage emerging since 2023, disrupting traditional macroeconomic logic.  
- Key indicators such as gold, copper, and interest rates are essential for assessing systemic risk, as asset pricing now incorporates significant "fiscal risk premiums."  
- Future scenarios include a mild recovery, potential inflationary pressures, or a liquidity crisis, with the U.S. dollar's strength stemming from relative fiscal weaknesses in other economies.

The K-shaped divergence in the pricing of major asset classes – the subsequent evolution of "fiscal risk premium"