The Federal Reserve announces a 25 basis point rate cut, as expected, but why did US stocks plummet?

First of all, the rate cut in December by the Federal Reserve was already a predetermined script.

The September FOMC meeting had already outlined such a story.

A total of 100 basis points rate cut throughout 2024.

A rate cut of 75 to 100 basis points in 2025.

So the remaining task is for the Federal Reserve to use its usual methods,

which is to manipulate market sentiment through the dot plot and statements from Federal Reserve officials.

They cannot let market sentiment be too pessimistic,

nor can they let market sentiment be overly optimistic and aggressive.

This balancing act has always been a basic skill of Federal Reserve officials.

In simple terms, it’s like giving a slap, then a sweet date.

When you get too excited, they give you a slap; then after you calm down, they feed you a sweet date.

The main goal is to keep market sentiment moderately optimistic,

thus achieving adjustments to inflation, employment rates, and CPI data.

So a 25 basis point rate cut is a fact, but it is not the source of the impact on US stocks and cryptocurrencies.

What affects US stocks and cryptocurrencies is actually a slap from the Federal Reserve,

that is, they use hawkish statements and the dot plot to tell you

that the rate cuts next year won't be so smooth, the extent has been reduced, and it might be gone.

This slap is quite severe, and Wall Street fund managers are hastily adjusting their positions,

hastily leveraging.

As a result, all three major indices fell.

However, later, the Federal Reserve will see that the market has been scared into a quail and will still come out to soothe it.

So this correction is likely a short-term reactive correction

that is not serious.

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