To The Moon

During the U.S. Independence Day weekend, while Trump was busy passing his signature "Great American" bill, his former "ally" Elon Musk announced the establishment of a new party to oppose the bill, creating a dramatic situation. In the U.S. system, as long as certain conditions are met, forming a new party is not very difficult. Although the Democratic and Republican parties are the most commonly heard of, there is no law stating that the U.S. can only have these two parties.

In reality, the U.S. operates a multi-party system, with over 100 legally registered parties including the Libertarian Party, Green Party, Independent Party, Communist Party, Constitution Party, and Pirate Party. However, the Democratic and Republican parties are overwhelmingly dominant. Since 1853, the U.S. has been governed alternately by Democrats and Republicans, and there has never been a president from a third party. Even among members of Congress, state governors, and state legislators, third-party politicians are rarely seen. Therefore, whether Musk's new party will be effective remains to be seen. History is made by people, and perhaps this new party could introduce new dynamics to shift internal social conflicts in the U.S., which might be a positive development.

Regarding the impact of this newly formed party on the U.S. stock market index, the U.S. system has a very important characteristic: it tends to shift crises or conflicts. When a crisis is significant, the risk is transferred globally; when conflicts arise, they are shifted internally (the ruling party blames the previous administration or the opposition). The advantage of this is that apart from a strong emotional reaction at the initial stage of risk emergence, the rest of the time is spent in continuous debates that dilute the risk and bring the market back to calm

In the short term, Musk's formation of a new party has little impact on the market and mainly serves as a long-term supervisory role on U.S. policies. In the long run, it might not be surprising if the party develops through new media platforms. As for the U.S. stock index, the short-term impact still depends on the progress of tariff-related negotiations, which currently seem to be going well, as reflected in the stock index's performance.

After the U.S. stock index reached new highs, the trend and technical characteristics have returned to their usual style, with the 20-day moving average still playing a significant role. In July, regardless of whether the stock index adjusts, as long as it does not break below the 20-day moving average, there is no need for major action, and one can wait for the final outcome of tariff situations. If it falls below the 20-day moving average, caution is necessary to understand the reasons behind the decline, whether it is tariffs, conflicts, natural disasters, or a combination of several issues (there are rumors of natural disasters in July, so it is best to take it step by step), and be mentally prepared.

From a long-term perspective, although the U.S. stock index has reached new highs, it has not significantly deviated from previous highs. If the monthly stock index level drops again, it could signal the beginning of a major turmoil, so cautious follow-up is still recommended.

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