The interest rate meeting was held at 2:30 am on September 19.
I studied the data and have some ideas, which I would like to share here. Of course, the following is a matter of opinion. The recent price increase or yesterday's price increase is due to the market's expectation of a 50 basis point interest rate cut for speculation. The market generally believes that the probability of a 50 basis point interest rate cut is greater than the probability of a 25 basis point interest rate cut.
1. Let me first talk about some data that I have studied. The probability of a rate cut tonight is basically 99%, and the difference is nothing more than how many points it will be cut. First of all, this is the first rate cut by the Federal Reserve in four years. The market is currently pricing in a 50-point rate cut by the Federal Reserve, which is priced at 125 basis points for the whole year. Many people don't understand what 125 means. When I saw this expectation, I only had one thought: it's too extreme and too outrageous. A rate cut of 125 basis points for the whole year represents a serious recession in the US economy. When has there been such a rate cut? The Internet bubble in 2000 and the subprime mortgage crisis in 2008. Another data, the Atlanta Fed's GDPnow model expects US GDP growth to reach 5%, indicating that the US GDP is still optimistic and not as the market prices. If the rate is cut by 125 basis points, there will be a short-term surge. This wave of rise is extremely unstable and it is easy to fall back after a high. So we must be alert to the risk of a rate cut that is less than expected. The current market is a bit too dovish about the Fed's rate cut. If the rate cut is confirmed tonight by 25 basis points, or if it is indeed 50 basis points as expected, but the outlook for the future is still optimistic, and the expectation of a full-year rate cut of 125 basis points is eliminated, it is lower than expected, so the risk of a short-term surge and fall will be very high.
2. Is macroeconomic regulation to lift the sedan chair for everyone? If you are a mysterious force, wouldn't you explode both long and short and then clear the leverage, get the liquidity of so many people who opened long positions, and then gradually hang retail investors high on the top of the mountain?
3. After this wave of rate cuts, long-term bullish!
4. A short-term rate cut of 25 basis points is lower than expected (first rise and then fall, or directly fall)
A 50 basis point rate cut is in line with market pricing behavior (explosive rise and then fall)
I prefer the first one!
