Following the previous two articles, Powell delivered to the market as he wished. The market has already priced in a September rate cut, and Powell also confirmed this. Although the initial policy statement was a bit hawkish, Powell confirmed at the press conference after the meeting that a September rate cut is coming. So we saw a big rise in US stocks, but it is worth noting that the leading stocks were not interest rate sensitive small-cap stocks, which is not what we expected to see, but AI companies and technology stocks, which is a bit worrying. The reason why small-cap stocks performed generally is that investors who had rotated out of technology stocks before are now back again.
Elsewhere, U.S. bonds rose, the dollar fell, and gold and other metals also rose, all of which made sense. It is expected that this situation will continue in the coming weeks.
What I am really concerned about now is the risk of a rate cut in September itself. If there is a rate cut, it is likely to be a hawkish rate cut. The European Central Bank has made hawkish rate cuts, and the Bank of Japan has made dovish rate hikes. Hawkish rate cuts mean that the Fed cuts rates while saying that it will not do anything next, which may trigger a stock sell-off. It is worth paying attention to this possibility in the coming weeks.
For now, Powell has met the needs of the market and has also received the response the market wants. The number one short position is also quite comfortable. $WIF
