On September 19, the Federal Reserve started a rate cut cycle, lowering the federal funds rate by 50 basis points to 4.75%-5.00%, the first rate cut since March 2020.

The Fed's dot plot shows that the median forecast for the federal funds rate at the end of 2024 is 4.4%, from 5.1% previously. The median forecast for the federal funds rate at the end of 2025 is 3.5%, from 4.1% previously.

Risk assets were boosted, and the U.S. stock market maintained its upward trend on Thursday, with the Nasdaq up 2.8% during the session and gold prices hitting a new high of $2,600 per ounce.

Goldman Sachs expects the Fed to implement a 25 basis point rate cut at each meeting from November 2024 to June 2025.

In the case of economic expansion, rate cuts belong to the bull market. Conventional understanding is that the Fed's rate cuts will cause the dollar to flow back to risk markets (U.S. stocks/gold/currency markets, etc.). The more rate cuts, the more dollars flow into risk assets, gradually forming a bull market. When the interest rate is low enough, it may even shake the nearly $6 trillion in cash that has been accumulated by the US money market funds and return to the market, adding fuel to the flames and increasing bubbles. The US economic recession is a small probability, and the bull market is a high probability

It is expected that the Federal Reserve will cut interest rates again in November, and will release multiple employment/economic/inflation data before November. If the data helps to cut interest rates and avoid recession, it will help the copycats to recover their capital. If the copycats recover their capital, we should still consider the ratio of big cakes and copycats. Big cakes are resistant to declines and follow the rise, while copycats follow the rise but are not resistant to declines. Position safety is the first priority.

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