Why did the market fall sharply despite the Fed's rate cut of 25 basis points?

The Federal Reserve announced a reduction of the federal funds rate by 25 basis points to 4.25%-4.50%. This action was in line with market expectations and should have been a positive signal. However, the market displayed a comprehensive decline. What is the reason?

Rate cut did not meet market easing expectations

Although the rate cut met expectations, Fed Chair Powell's statements disappointed the market. He emphasized that future policy adjustments will be more 'cautious' and made it clear that rate cuts would need to wait for further improvement in inflation. This 'hawkish yet dovish' signal directly suppressed the market's hopes for rapid monetary policy easing.

Discrepancy between market expectations and reality

Investors generally expected more easing to boost the economy, but the Fed's statements shattered this illusion, causing a swift shift in market sentiment. In the short term, concerns over a stronger dollar and tightening liquidity intensified selling pressure.

Macroeconomic worries and funds seeking safety

Concerns about a global economic slowdown have intensified. The rate cut failed to effectively boost market confidence, leading to further capital flowing into safe-haven assets, resulting in synchronized corrections in the stock, bond, and even cryptocurrency markets.

Summary of views:

Though the Fed's rate cut seems favorable, under the dual blow of insufficient market expectations and cautious statements, the market chose to digest negative signals. Moving forward, attention should be paid to policy direction and economic data, as short-term adjustments may serve as a buildup for medium- to long-term opportunities.

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