Behind the Record Highs of Risk Assets: The True Support for the Market Comes from Policy Credibility Rather than Optimistic Sentiment

On August 5, global markets continued to show strong performance in risk assets, but the real drivers of capital flows are no longer simply corporate earnings reports or AI themes. Instead, it is the synchronized intervention of governments in energy, exchange rates, supply chains, and monetary policy that has led to a reassessment of institutional credibility and policy effectiveness in the market.

AI capital expenditure remains the most important growth engine for the market. With the signing of a computing services agreement worth up to $10 billion, along with the launch of the new generation V10 V-NAND, which significantly increases storage density, it is once again proven that AI infrastructure is still in a phase of rapid expansion. The market continues to be willing to pay a premium for computing power, storage, and semiconductor supply chains, indicating that companies are still willing to bear higher capital costs in exchange for future competitive advantages. However, officials have simultaneously released more hawkish signals, believing that the current level of interest rates is still insufficient to effectively curb inflation, creating a coexistence of AI investment and a high-interest-rate environment. In the future, the market will pay more attention to whether companies have sufficient cash flow and profitability to support large capital expenditures, rather than relying solely on valuation expansion to drive stock price increases.

Another noteworthy change comes from the energy market. Negotiations have made substantial progress, with agreements gradually taking shape, and discussions have even begun on participating in mine clearance and establishing a joint maintenance mechanism. This shows that all parties have gradually moved from military confrontation to a negotiation phase regarding shipping order and energy governance. If normal navigation in the strait is restored in the future, even if maintenance costs increase, they will still be far lower than the supply risks brought about by war, and the risk premium in the energy market is expected to continue to decline. At the same time, the government is considering extending the exemption under the Jones Act, further utilizing administrative tools to lower domestic energy costs, reflecting that energy prices are no longer just an economic issue but also directly affect political support rates and policy stability.

In addition, while the central bank has not yet intervened in the foreign exchange market, the finance minister has publicly stated that necessary measures will be taken to support the yen, indicating that exchange rates are gradually becoming part of policy tools rather than being entirely market-determined. On the other hand, ongoing research into expanding the scope of metal tariffs also indicates that supply chain protection policies will continue, making it difficult for global manufacturing costs and inflationary pressures to completely dissipate in the short term.

Although there are warnings that the market may experience a crash similar to that of 1987, this viewpoint is more based on the structural risks formed by market leverage and volatility compression rather than a deterioration in fundamentals. It is worth noting that while U.S. stocks hit new highs, the VIX also rose simultaneously, indicating that the market has not completely ignored potential risks but is instead pushing asset prices up through options hedging and leveraged trading. This structure means that as long as AI capital expenditure, corporate profits, and policy credibility can be maintained, the market still has an upward basis; however, if inflation heats up again, policies tighten further, or negotiations stall again, overvalued tech stocks and high-leverage strategies will become the main sources of renewed volatility.

In the short term, market focus will be on whether agreements are officially implemented, the latest statements from officials regarding the interest rate path, and whether investment in AI infrastructure continues to accelerate. These three main lines will jointly determine the new balance between global capital costs, energy prices, and technology valuations, and will become the core basis for pricing risk assets in the future.

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