【FOMC meeting interpretation】

If we divide the FOMC meeting last week into three parts: interest rate decision, dot plot and press conference: First, the federal interest rate was unexpectedly cut by 50bp in the first round of the so-called "preventive rate cut", and the short-term sentiment of risky assets has remained good due to this dovish rate cut. But in fact, the dot plot is slightly hawkish. The reason for this is that it shows that there will be four rate cuts by the end of the year, a total of 100bp, which means that there will only be two more 25 cuts this year, and the room and frequency of rate cuts are limited. In addition, it is expected that there will be only four rate cuts in 2025, and interest rates will remain at about 3% in the next few years. Even if it enters a rate cut cycle, as long as the policy operates normally, the Federal Reserve will still use the neutral interest rate as a reference and maintain interest rates near it. This is its usual operating path, which does not meet the expectations of most people for zero interest rates and large-scale water release. In fact, we have seen that after the rate cut, the US dollar index and US Treasury yields, which are directly related to interest rates, have even rebounded. They have been priced in for rate cuts in advance, and now they are facing the lack of imagination of the negative impact and the subsequent rate cuts.

The rise of risky assets such as US stocks and cryptocurrencies certainly cannot rule out the positive stimulus of a sharp interest rate cut, but more importantly, the soft landing guidance in Bao's speech. The nearly one-hour press conference can be summarized in one sentence: "The US economy will achieve a soft landing." On the interest rate cut day, a 50bp interest rate cut (a sharp interest rate cut) achieved a 25bp effect (recession concerns did not rise). From a personal perspective, the current market's expectations for a soft landing are the strongest this year. The expectation of a soft landing will not only increase the risk appetite of the US market, but also help listed companies expand production and increase valuations, which is directly beneficial to the numerator of US stocks, and interest rate sensitive assets/lagging assets such as the RMB and Bitcoin will also rise accordingly.

At present, we should maintain the minimum respect for the soft landing expectations, and it is not appropriate to touch the left side. Against the background of poor overall US dollar liquidity, 67k-70k are more cost-effective opportunities to open an empty net, and a large volume breakthrough of 70,000 is a signal to leave the market. In addition, the first employment data after the interest rate cut will be released in early October. If it supports a soft landing, it will support risky assets; but if it deteriorates further, the recent soft landing trading logic will be broken and the success rate of short opening will be higher.#鲍威尔