According to the Zhitong Finance APP, whenever U.S. stocks plummet, discussions about the "Federal Reserve put option" tend to resurface. This adjustment is no exception, but the threshold for the Federal Reserve to step in and assist the market seems to have quietly risen. The so-called "Federal Reserve put option" refers to the widespread belief that the Federal Reserve will support asset prices through monetary easing and other means when prices fall, a notion that has been deeply ingrained since the era of Alan Greenspan (1987 to 2006). Indeed, maintaining financial stability is one of the Federal Reserve's responsibilities, and from this perspective, the "Federal Reserve put option" always exists and may be activated at any time. The global financial crisis from 2007 to 2009 and the COVID-19 pandemic in 2020 are vivid examples of the Federal Reserve exercising this "option." HSBC's strategists point out that the Federal Reserve's policy tools are not limited to emergency rate cuts or quantitative easing. For instance, mentioning in policy statements that financial conditions have significantly tightened is enough to soothe market sentiment. However, the current stock market sell-off is markedly different from past crises, with the Nasdaq index deeply entrenched in a correction zone, down over 10% from its peak, and the S&P 500 index following suit, nearing this zone. Yet, this has not stopped market speculation that if the decline further expands, the Federal Reserve may soon intervene. Figure 1 It is understood that the chaotic trade policies of the Trump administration have brought significant uncertainty to consumers, businesses, and investors, with the risk of economic recession quietly rising. In less than a month, the U.S. stock market has evaporated about $5 trillion in market value, with tech giants being the hardest hit, experiencing sharp declines in stock prices. Figure 2 The Roundhill Equal Weight "Seven Giants of U.S. Stocks" ETF has fallen 20% from its December peak. Given that stock ownership is highly concentrated among the wealthiest one-tenth of the U.S. population, who currently account for 50% of consumer spending, Wall Street's weak performance may quickly ripple through the entire economic system. Goldman Sachs' financial conditions index shows that policymakers are closely monitoring financial conditions, which are currently the tightest they have been in nearly a year. This tension is almost entirely due to the stock market's sharp decline. However, the broader economic environment suggests that the market needs to decline further or accelerate its decline to trigger a proactive response from policymakers. Although the volatility of stocks, bonds, and some major currency pairs has risen to multi-month highs and continues to increase, it remains far below the levels seen during past market crises Credit spreads are showing a similar trend. This week, the U.S. high-yield bond spread has broken through 300 basis points for the first time in six months, but it is still far below the spread levels of 800, 900, or even 2000 basis points seen in the past few decades. In terms of liquidity, it still seems abundant (according to the Federal Reserve). Major markets have not seen price gaps, trading is smooth and unobstructed, and there are no signs of pressure in the financing market, with the corporate bond primary market also operating normally. Moreover, a market recession or economic downturn may not trigger deflation as past recessions have, as any current downturn may partly stem from President Trump's threatened import tariffs—while tariffs may hinder economic growth, they could also push prices higher. The stock market's sharp decline coexists with the risk of "stagflation," which will pose significant challenges for the Federal Reserve and may constrain its policy options. HSBC's strategists believe that whether from the Trump administration or the Federal Reserve, any policy "put option" has a strike price that is "far off." The S&P 500 index has averaged a 14% decline from its peak, yet even without the "Federal Reserve put option" to back it, the index typically still manages to rise by the end of the year. Currently, the market has fallen 10% from its peak. According to Treasury Secretary Scott Basset, the "Trump put option" does not exist, and the President himself stated last week that he "has not even been paying attention to the market." The Trump administration seems willing to accept declines in asset prices and a slowdown in economic growth, viewing it as a "detox period" or "transition period" towards a more private sector-dependent economy. Morgan Stanley's strategists, on the other hand, believe that the likelihood of a "Federal Reserve put option" is much greater than that of a "Trump put option," which sharply contrasts with the recent statements from Trump, Basset, and Federal Reserve Chairman Jerome Powell. Powell stated that the Federal Reserve has tools available when facing extreme economic pressure. This may be true, but the strike price may be far lower than many investors expect