Most investors believe that all the actions of the Fed in the remaining time have been priced in. However, it is still necessary to be vigilant to market changes, because a sudden storm may change the situation in an instant.
Just after the Chinese stock market closed, the global market ushered in uncertainty. The speech of Federal Reserve Chairman Powell brought calm thinking to the market - he did not advocate a rapid interest rate cut. This is tantamount to "Mount Tai pressing down on the top" for the market, and its impact will become increasingly apparent.
The core content of Powell's speech (generally continuing the message of the meeting)
Rate cuts: There is no fixed path set, and interest rates will be lowered gradually based on the decisions of each meeting. He mentioned that interest rates will be lowered "over time" and there is no rush to cut interest rates quickly.
Economy: The U.S. economy is generally strong, and there are no signs that the economy is moving more toward a recession. Employment: The labor market has cooled over the past year but remains stable. No further cooling of labor market conditions is necessary to achieve the 2% inflation target. Inflation: Further progress has been made toward a sustainable return to the 2% target.
Powell said that if the economy performs as expected, there may be two more rate cuts this year (each 25 basis points). Overall, Powell's remarks were not tough, but the phrase "no rush to cut rates quickly" touched a sensitive nerve in the market. He reminded people that some of the market's interest rate expectations may have been too extreme. After the speech, traders reduced their bets on the extent of the Fed's rate cuts, and the probability of a 50 basis point rate cut in November fell to 35% from 53% last Friday.
1. From the market reaction, the trend of the US dollar, gold, and US Treasury bonds is closely related to Powell's speech. However, the US stock market eventually closed higher (which is inconsistent with logic). In fact, after Powell's speech, the S&P index continued to fall for a while, but began to rise before the close, because the activities at the end of the quarter helped the stock market (momentum trading and typical bookkeeping activities usually occur at the end of the quarter).
Since Powell's speech was close to the end of the global trading session, the market has not fully digested the news. If gold and US stocks fall again today, it may be the beginning of a decline. For the Chinese market, we need to pay special attention to these changes in overseas markets.
2. Next, the US September ISM manufacturing PMI, US August JOLTs job vacancies, ADP, September non-farm data will be released one after another, and the market will have a deeper understanding of Powell's speech. His speech also seems to hint at this Friday's non-farm data.
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