Author: Jessy, Golden Finance

"When the dollar dies, everything else comes to life."

On September 18, local time, the Federal Reserve announced a 50 basis point interest rate cut, the first rate cut in more than four years. The rate cut was beyond expectations, and the United States started a cycle of rate cuts, flooding the market with money, and major assets in the world have all seen a general rise.

After the US cut interest rates, some major countries also announced interest rate cuts. For example, China announced a reduction in reserve requirement ratio and interest rates, a reduction in mortgage rates, and a package of policies to stimulate economic development in order to boost the domestic economy.

After the Fed cuts interest rates, most countries will generally follow suit. The US dollar is the world's dominant currency, and the more open the financial system is, the more likely it is to keep interest rates in step with the Fed. Especially those countries or regions that have no independent monetary policy at all, that is, those that are completely pegged to the US dollar, will have to follow suit as soon as the US dollar cuts interest rates. For example, the Hong Kong dollar is the shadow currency of the US dollar. The Hong Kong government has to follow suit to cut interest rates as much as the US cuts interest rates. Otherwise, the arbitrage funds brought by the interest rate gap will be able to destroy the Hong Kong government's foreign exchange reserves in a few days.

After the US rate cut, many central banks announced their latest interest rate policies. Countries and regions such as China, Hong Kong, Indonesia, South Africa, and Saudi Arabia announced rate cuts. Japan, which is in the rate hike cycle, chose to "stand still", while Brazil chose to raise interest rates. Some countries and regions also rushed to cut interest rates as early as the first half of this year, such as the European Union and Canada.

In theory, if the United States cuts interest rates and the dollar depreciates, the currencies of other countries will appreciate relatively, there will be excess liquidity, and more money will flow into high-risk assets. The attractiveness of domestic assets in the United States will decline relatively, while overseas assets will become more attractive, and global stock markets will rise sharply.

However, there is a certain gap between the actual situation and the theory. The performance of financial assets will also be affected by factors such as politics and geopolitical conflicts. In this article, Golden Finance sorted out the performance of major global assets after the US interest rate cut.

Crypto assets

Currently, crypto assets, especially Bitcoin, have become highly US-based. After the US announced a rate cut, Bitcoin's overall trend was upward, with Bitcoin rising 5.03% at the end of trading to $63,165. As of September 30, the highest price of Bitcoin in a single day reached nearly $66,000. As of press time, the price of Bitcoin has stabilized at around $63,000.

The total crypto market capitalization has also seen an increase, currently stabilizing at $2.4 trillion, while on September 18, the value was nearly $2.2 trillion.

Changes in the total crypto market value

A shares

After the Federal Reserve announced a rate cut, China quickly followed suit. On September 27, the People's Bank of China simultaneously cut the reserve requirement ratio and interest rates.

In the stock market, within less than ten trading days, some countries and regions, such as the European Union and the United Kingdom, rushed to cut interest rates as early as the first half of this year. The stock market broke through from 2,700 points to 3,300 points.

On September 30, the last trading day before the National Day holiday, A-share trading volume continued to increase, with the total trading volume of the Shanghai and Shenzhen stock markets exceeding 2.5 trillion yuan, setting a new record.

Hong Kong stocks

After the Federal Reserve announced a rate cut, the Hong Kong Monetary Authority immediately announced that it would cut the benchmark interest rate by 50 basis points to 5.25%, effective immediately.

Many banks in Hong Kong also announced that they would cut the Hong Kong dollar prime rate (P) by 0.25% in the near future. Among them, Bank of China (Hong Kong), HSBC and Hang Seng Bank cut it to 5.625%. On the day when the rate cut was announced, the Hang Seng Index closed at 18013.16 points, a new high in more than two months.

In the past month, the Hang Seng Index has risen by nearly 20%, and the Hong Kong Stock Exchange (00388) has soared by more than 37%.

European stock markets

The European Central Bank began cutting interest rates in June, which was earlier than the United States announced this time.

After the Fed cut interest rates, the Bank of England said it would keep interest rates unchanged. European stock markets closed higher after the Fed cut interest rates, with the European technology sector leading the way with a gain of more than 3.4%. France's CAC40 stock index closed up 2.29%. The performance of the German stock market was particularly eye-catching. The Dax index opened sharply higher after the announcement of the interest rate cut, pushing the index above the 19,000 mark for the first time in history. The UK FTSE 100 rose more than 1.25%, and the Dutch AEX index closed up 1.77%. As of September 30, except for the FTSE 100, which hit a high on September 19 and is now falling back, the other stocks are still in an upward trend.

US stocks

The US stock market closed down collectively on the day of the rate cut, possibly due to the investment strategy of "buy news, sell facts". The three major indexes, Dow Jones, S&P 500 and Nasdaq, fell by 0.25%, 0.29% and 0.31% respectively.

In the foreign exchange market, the U.S. dollar index also showed a volatile reversal trend on the same day. After approaching the 100 mark at one point, it gradually recovered most of its lost ground and finally fell slightly by 0.08% on the day.

On the day after the Fed cut interest rates, U.S. stocks rose across the board, with the S&P and Dow Jones closing at record highs. When the intraday highs were refreshed, the Nasdaq rose by more than 3.1%, the Dow Jones rose by nearly 658 points, and the S&P rose by nearly 2.1%. The S&P hit a record closing high for the first time since July, small-cap stock indexes rose for seven consecutive days, and Chinese stocks outperformed the U.S. stock market.

gold

After the Federal Reserve cut interest rates, gold continued to hit new highs. On September 30, the international COMEX gold price was 2672. Since the beginning of this year, the international COMEX gold has risen by nearly 30%.

Brazil IBOVESPA Stock Index

After the Fed announced the rate cut, the Monetary Policy Committee of the Central Bank of Brazil voted unanimously to raise the benchmark interest rate by 25 basis points to 10.75%, the first rate hike in two years. The Central Bank of Brazil believes that this move will help stabilize the currency exchange rate and fight against depreciation pressure caused by inflation.

Brazil's IBOVESPA stock index has been on an overall downward trend after Brazil announced an interest rate hike, with a certain rebound since the 23rd.

Nikkei Stock Average

After the Federal Reserve cut interest rates, the Bank of Japan chose to remain on hold and maintained its policy rate at 0.25%.

The Bank of Japan believes that due to the appreciation of the yen, the risk of price increases exceeding expectations is decreasing, and there is no need to raise interest rates further at present.

Currently, the Federal Reserve has entered a cycle of interest rate cuts, while Japan is in a cycle of interest rate hikes. After the United States announced a rate cut, the index rebounded to the 37,000 mark for the first time in two weeks, and has been in an overall upward trend these days.

Summarize

At present, it has been less than half a month since the Federal Reserve announced the interest rate cut. Most of the world's major assets are in a theoretically rising trend. Large-scale money printing will promote a bull market, but it will also give rise to bubbles.

Investing requires rationality. It is difficult for people to make money beyond their own cognition. Faced with the general rise in major global assets, choosing a market that you are familiar with to bet on and strictly implementing your own trading strategy may be the only way to make a safe investment.

The US election in November is also an uncertain factor that will affect the future market.