Unfortunately, my prediction came true: the U.S. stock market plummeted, Wall Street was in a state of panic, investors were in despair, the Federal Reserve was the instigator, and the outlook for the market remains uncertain and confusing. With stubborn inflation coupled with an economic recession, the global stock market is not looking good!

On Monday (February 20th), in my article titled "The U.S. Dollar Index Soars, Reaching a Six-Week High, Wall Street Financial Titans on High Alert," I anticipated that the market would face some risks and advised investors to be cautious in their choices, prioritizing risk prevention. Unfortunately, my prediction came true so quickly. After a day off for Washington's birthday on Monday, the U.S. stock market resumed trading on Tuesday and experienced a significant decline by the close. I didn't expect my forecast to be so accurate, nor did I expect it to come true so soon!

Affected by multiple factors, the U.S. stock market suffered a significant drop on Tuesday, with the Dow Jones Industrial Average falling nearly 700 points and the S&P 500 Index breaking below the 4,000-point threshold. The first and most significant factor was the strengthening of the U.S. dollar. The U.S. Dollar Index, which measures the dollar's value against six major currencies, rose notably on February 21st, increasing by 0.30% and closing at 104.1723.

The second and most critical factor was the comprehensive increase in U.S. short-, medium-, and long-term Treasury yields, coupled with severe inversion. The climb in short-term U.S. Treasury yields further dampened market sentiment. On Tuesday (February 21st), Eastern Time, the benchmark 10-year U.S. Treasury yield rose to 3.9%, while the 2-year Treasury yield climbed to 4.7%, continuing the upward trend in yields from the previous week. Both reached their highest levels since November. This implies that the U.S. 2-year market loan rate is at least above 6.7%. For U.S. technology companies, which are highly dependent on market financing, this is a devastating blow, making survival nearly impossible! What's more severe is that the 10-year Treasury yield is inverted by 0.8 percentage points compared to the 2-year yield, indicating investors' psychological expectations for short-term risk aversion and their fear of short-term risk outbreaks.

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The reason for the rise in U.S. Treasury yields is that higher-than-expected inflation data has led traders to worry that stubborn inflation will cause the Federal Reserve to maintain higher interest rates for a longer period, leading the U.S. economy into a recession.

From an economic data perspective, the latest earnings reports indicate a deterioration in consumer conditions and a poor outlook for consumer spending. Two heavyweight commercial retail barometer companies have just released their earnings reports. Home improvement retailer and Dow component Home Depot announced fourth-quarter revenue below expectations and issued a gloomy performance outlook. Walmart reported its first annual profit decline in six years. Due to rising economic uncertainty, the company is cautious about its prospects for the current fiscal year. On Tuesday, the company's CFO, John Rainey, stated that consumers are being squeezed by rising interest rates and declining savings rates, which threaten spending.

In the final analysis, stubbornly high inflation is reluctant to exit the stage, and the market expects the Federal Reserve to continue with aggressive interest rate hikes. Some international investment banks predict that the Federal Reserve will raise interest rates by 25 basis points at the meetings in March, May, and June to combat stronger inflation. More radical views suggest that the Federal Reserve may raise interest rates by 50 basis points in March, and a 75 basis point hike is not ruled out. According to the interest rate dot plot released by the Federal Reserve in December last year, most policymakers believe they will raise the federal funds rate to 5.1% this year, with more than a third of officials expecting the Federal Reserve to raise interest rates above 5.25%.

Once again, I remind investors that, at least in the short term, they should not be aggressive but conservative, placing risk prevention awareness at the forefront!