Strong data triggered market concerns, and risk assets staged a "2024-style correction"! Is the policy market back again?
The recent strong performance of US economic data has caused market concerns about the rebound in inflation and weakened expectations for future interest rate cuts. Liquidity expectations weakened, and risk markets responded immediately, showing a downward trend. This scene seems to remind people of the time when Federal Reserve Chairman Powell managed emotions by regulating market expectations at the turn of spring and summer in 2024.
After Trump confirmed his election advantage, the Bitcoin market once showed an independent trend, showing the profound impact of US policies on the crypto market. However, as Bitcoin broke through the $100,000 mark and the festive atmosphere faded, the market returned to the dominance of macro data and followed the fluctuations of US stocks. Despite this, this is still a "policy market" in a broad sense, because macro data is always closely related to US financial policies.
After Trump took office, US foreign policy may become more self-centered and isolated, and even ignore the interests of allies. His recent shocking remarks about Canada, Mexico, Panama and Greenland shocked the world and caused tensions.
This is not only to please MAGA voters and promote American nationalism, but also to divert domestic attention by creating external conflicts, so that supporters can immerse themselves in the illusion of "the glorious era of the United States". At the same time, the market's expectation that the Fed would not cut interest rates in January had been digested as early as December. Tuesday's strong data further suppressed the fantasy of short-term interest rate cuts and triggered market turmoil.
However, this fluctuation is more like a game around the extent of the Fed's interest rate cuts in 2025. This year, this issue may become the core focus of market attention.
