Why did the Fed's interest rate cut lead to a stock market decline?

First, after cutting interest rates by 25 basis points, Powell directly informed everyone that the first phase of the Fed's rate cut was complete, and the next steps would involve gradually lowering rates based on data, signaling a slowdown in the pace of rate cuts. This clearly released hawkish statements.

Secondly, the dot plot was more aggressive than the market's previous prediction of four rate cuts next year reduced to three, directly indicating that there would only be two cuts next year and two cuts the year after, which is undoubtedly a heavy blow to the market.

Last night, U.S. stocks plummeted, with all three major indices dropping around 3%, and the Nasdaq even fell by 3.5%, while the dollar index soared above 108. The third point of hawkish performance was the upward revision of the U.S. economic forecast, with the GDP for 2024 revised up from the previous prediction of 2.0 to 2.5, a direct increase of 25%, while the PCE inflation indicator was also raised from 2.3 to 2.4.

This means that the Fed believes the economy is good, employment is optimistic, and inflation will rise, which leads to the Fed being in no hurry to cut rates. Going forward, global financial markets will once again fall into the “one rise and five kills” rhythm of dollar scarcity. Today's A-shares and Hong Kong market are also extremely dangerous, and everyone must pay attention to the risks.