Key Verification of the Big Logic Behind the US Dollar: The Next Major US Stock Market Crash

``` Citibank believes that the next time the S&P 500 Index sells off by more than 5% will be a litmus test for whether the US dollar still possesses safe-haven attributes, and this will determine the medium-term direction of the dollar. According to Chasing the Wind Trading Desk, Citi’s Global Macro Strategy team stated in its October 15 report that this year’s dollar weakness can be attributed to two main themes: reduced US equity allocations after Q2 tariff shocks, and subsequent adjustments to hedge ratios. The core market debate is why the US dollar did not exhibit safe-haven properties in April. At present, there are two explanatory theories in the market: View 1 argues that the simultaneous drop of the dollar and US equities in April was caused by a “self-inflicted” shock, an abnormal phenomenon, and the hedge ratio story may be over. View 2 holds that foreign capital’s extreme allocation to US equities has resulted in ongoing positive correlation between the US stock market and the dollar, so the increase in hedge ratios can continue. Citi slightly leans toward the latter. Analysts believe that the breakdown in the correlation between US stocks and the dollar is not a one-off event, but rather the result of years of extreme accumulation of US equities by foreign investors. As the AI bubble continues to absorb global economic capital, this trend will only grow stronger. The longer the positive correlation persists, the lower the benefit of dollar exposure for foreign investors, thus the motivation to continue increasing dollar hedging ratios remains. The Citi team currently has a slightly bearish view on the dollar, but emphasizes there are three major catalysts for a bullish dollar outlook in the future: - The conclusion of the Lisa Cook Supreme Court case in January 2026 without her being dismissed, and approval of a new FOMC member; - Recovery in the US labor market; - The dollar regaining its safe-haven status during risk aversion; Analysts emphasize that until “the Fed’s dovish stance peaks and the US cyclical weakness bottoms out,” it is hard to call a reversal for the dollar (continued weakness is expected). This inflection point is expected to occur within the next three months, at which point the dollar is likely to rebound in 2026. Risk Warning and Disclaimer The market has risks, and investments should be made cautiously. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of any particular user. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their own situation. Investing accordingly is at your own risk. ```