Over the past week, the global markets have seemed lively on the surface, but the underlying logic has already started to quietly shift.

Stock markets have risen, the bond market is getting restless, and leverage has piled up to unnerving heights. Borrowing costs for developing economies have hit new highs—when you connect these signals, it’s clear that this is far more than just ordinary market fluctuations. In the coming period, policy direction and shifts in the credit environment will essentially determine where the money flows and how assets are revalued.

The most obvious change this week? Risk appetite is back. Global stock markets have broadly climbed, mainly because the market is betting that the Federal Reserve will start cutting rates. Everyone is jumping in early, thinking the “liquidity easing cycle” might really be on the horizon. On the other hand, the Bank of Japan unexpectedly released a rare hawkish signal—rate hikes may be coming. Japan’s 10-year government bond yield responded by hitting a new cycle high, which in turn rattled global bond markets.

This divergence in monetary policy directions is driving a major shift in capital flows. Low-yielding bond assets are being abandoned, and money is flowing into the stock market. Global capital flows and valuation logic are clearly heading for a new round of reshuffling.

But what's even more worth noting is the credit and leverage side. Recently, several hedge funds have been exposed for pushing leverage to near all-time highs, mainly betting on debt-supported strategies. This kind of high-leverage play is extremely risky if it encounters tightening liquidity or sudden market shifts—liquidation risks are no joke.

Especially with AI-related assets, valuations are absurdly high and their expansion is heavily reliant on debt financing. Market concerns about a bubble in this sector are nothing new.