Do you also think that the US interest rate cut cycle is coming and interest rates will continue to fall? No matter what you think, the consensus on Wall Street is that interest rates will fall by at least 2% in the next year, and return to the low interest rate era in two years. Most people in the market do think so, which is not difficult to understand. After all, the Federal Reserve just raised interest rates from 0% to 5.5% two years ago. Why shouldn't it be lowered a little more after that, at least back to the pre-epidemic period? However, this thing that everyone thinks is normal actually has a very large variable. There was a period of time in history that was very similar to the current US stock market. At that time, the Federal Reserve also raised interest rates rapidly due to inflation, and after the interest rate hike, it also magically achieved a soft landing and successfully controlled inflation. This period of history was the US stock market in 1995. After the Federal Reserve raised interest rates sharply and inflation was under control, it only cut interest rates three times in the next three years, a total of 75 basis points. And then. Changes, it is still raising interest rates, so why is this? Does it mean that there are huge variables in our current interest rate cuts? In today's video, let's go back to the U.S. stock market in 1995 and 1996 to see what happened during the interest rate cut cycle. Why did the Federal Reserve stop cutting interest rates in the end, contrary to everyone's expectations, and how did the market respond? This video can be said to be the most subversive video I have studied recently. It is not only crucial for our investors, but also closely related to the lives of each of us, so you must watch it to the end. The history of interest rate cuts in 1995 must start from 1994. At the beginning of 1994, in order to prevent the hot economy from bringing inflation, the Federal Reserve began to raise interest rates very aggressively. The benchmark interest rate rose from 31% to 6% in one year, and the U.S. stock market also experienced a lot of pain, which is actually almost the same as our U.S. stock market two years ago. In the same way, we are also facing sudden inflation and unprecedented rapid interest rate hikes, and the U.S. stock market has also experienced the largest bear market in more than a decade. I also made a special video at the time to analyze this period of history. You will find that the logic of the subsequent development of the U.S. stock market is very similar to this period of history. It can be seen that understanding history is still very helpful for us to understand the current market.However, our focus today is not on the interest rate hike cycle, but what happened to the US stock market after the rate hike, which is more important for us now. In that year, the last rate hike by the Federal Reserve occurred in February 1995, when the Federal Reserve raised interest rates by 50 basis points in one go. However, surprisingly, even after a full year of rate hikes, the US economy was still unusually strong at the time, with GDP growth still as high as 4.5%, and the unemployment rate still maintained at 5.4%. Here I have to explain that the unemployment rate standard at that time was different from that of today. At that time, an unemployment rate of 6% was considered full employment, so 5.4% was already a very hot data. Because of this, the market at that time. They all believed that the Federal Reserve would further raise interest rates by 100 to 200 basis points. Under this expectation, most people believed that the strong economy was only temporary. For example, Goldman Sachs predicted at the time that the US economy could barely maintain in the first half of the year, but would begin to decline in the second half of the year. As expected, not long after, the US economy began to flash red lights, various economic data began to turn downward, corporate pressure began to gradually emerge, and recession concerns intensified. All this reached its peak after a job report in May of that year. In May 1995, the unemployment rate in the United States suddenly soared from 5.4% to 5.8%, and not only did the number of jobs not increase, but it also decreased by 100,000. After the news was announced, long-term interest rates plunged sharply, falling by 1% in a month. For a time, recession concerns were very effective, and the market began to expect the Federal Reserve to cut interest rates quickly to save the economy. I believe that corrupt officials who often pay attention to the market should have discovered that this is actually exactly the same as what we have been doing in the past period of time. The cause of this big correction in US stocks two weeks ago was precisely due to a bad job report in 1. In this way, recession concerns were dragged back to the table, and the market began to eagerly expect the Federal Reserve to cut interest rates. Now, the expectation of interest rate cuts this year has increased from one to six times. History is so similar. Will the interest rate cut really come as expected? Let’s continue looking at the story of 1995. After the recession sentiment had been brewing for more than a month, the then Federal Reserve Chairman Greenspan finally spoke out.He first admitted that there is indeed a possibility of a short-term recession in the United States, but he believes that the US economy is still very healthy in the long run, and said that the current downturn is only a temporary phenomenon. This statement was considered to be that the Federal Reserve would not cater to the market to cut interest rates. However, not long after, Greenspan compromised with the market. Just two weeks later, at the Fed's regular meeting in July, Greenspan announced the first interest rate cut of 25 basis points. At the press conference, Greenspan made no secret of saying that although he did not think there would be a recession, his interest rate cut this time was a precaution for a possible recession in the future, which was an obvious performance of catering to the market. As a result, the stock market and bond market rose sharply, and the market has begun to expect the price of continuous interest rate cuts in the next few months. However, I don't know if he regretted his decision. Within two days, Greenspan came out to pour cold water on the market. He once again emphasized that the US economy will recover within a few months and hinted that there will be no further interest rate cuts. The implication is that our interest rate cut this time is just a token of our intention, and you should not over-interpret it. In fact, Greenspan did not take action in the following months, but it was not because he was too embarrassed to do so. Instead, the US economy began to recover as he expected. The unemployment rate did not rise further, but began to turn downward. Various indicators also began to recover gradually, and some forward-looking indicators even showed that the US economy was about to take off again. For a time, the fear of recession disappeared. But soon, another unexpected problem came quietly, and that was the rapid decline in inflation. Some people said that the decline in inflation was a good thing, right? Indeed, but the decline in inflation that year was a bit too fast. By the end of 1995, the core CPI was only 1.7%, which was far from a threat. The service CPI recorded the smallest increase in the past 30 years, and energy even experienced deflation. The Fed raised interest rates in 1994 to control inflation. Now that inflation has been controlled and there are even signs of deflation, there is naturally no reason to continue tightening. So the Fed cut interest rates in two regular meetings in December 1995 and January 1996, by 25 basis points each time.Greenspan also emphasized at the time that the interest rate cut was not because of economic problems, but because he saw that anti-inflation had made considerable progress, and he felt that there was a certain room for interest rate cuts. From the first interest rate cut in July 1995 to the entire interest rate cut cycle in January 1996, we can draw the following inspirations. First, the Fed's interest rate cuts are not continuous after the start of the interest rate cuts, but will be adjusted continuously according to the actual economic situation. And we go back. As of now, you will find that the interest rate cut in September is basically a done deal, but how will it develop after that? The market now expects that the interest rate will be cut continuously at each regular meeting, but the actual situation may not be the case. Another inspiration is that the Fed does not necessarily have to wait until the economy is bad to cut interest rates. If inflation declines rapidly, the Fed will also cut interest rates. Now many people think that the Fed's interest rate cut is not a good thing, because it means that there must be something wrong with the economy. I also saw that some self-media people like to use the stock market decline when the interest rate cuts in 2008 and 20 as evidence, saying that the stock market will collapse once the interest rate is cut. This is actually completely putting the cart before the horse. In fact, the history of 1995 and 1996 tells us that the Fed can cut interest rates when the economy is still good, and this has nothing to do with crises and crashes. At this point in the story, the readers must be curious, how did the stock market perform from 1995 to the beginning of 1996? In fact, despite the recession and the cold water poured by the Fed throughout the process, the stock market has actually been on a rare bull market. In 1995, the stock price rose by nearly 50%, and this was mainly due to two reasons. One was the decline in interest rate expectations, from a 100-200 basis point increase at the beginning of the year to a 75 basis point cut, and the other was that the overall US economy was relatively strong, and corporate profits were also good. However, what happened in 1996 was completely reversed. After a series of interest rate cuts, after inflation had been completely controlled, no one expected that this would be the last time the Fed would cut interest rates. After that, the Federal Reserve's benchmark interest rate remained at a high level of 5.25% for three years. This was a very tight interest rate level, and such a tight situation has not occurred again in the following 30 years.So what happened in the market that year? What made the Federal Reserve completely change direction, and how did the U.S. stock market respond at that time? Before answering this question, I would like to say a few words to you. There are many old viewers. Miss Meituojun has been working on a content product specifically for Chinese investors, called Meituo PRO. In Meituo PRO, Meituojun and four types of professional analysts will continue to output professional content at the investment bank level for everyone, and the key is to make it easy for ordinary people to understand and interesting to read. Whether you are an expert with many years of investment experience or a novice in the stock market, you can find professional content suitable for you here. There are also thousands of excellent PRO investors in the circle, and everyone exchanges investment, collides ideas, and looks for opportunities. Meituo PRO is not just a membership product, but an environment where everyone can continue to improve together. Come and listen to the most cutting-edge investment analysis every day to enrich your investment cognition, come and see the collision of views of excellent investors every day, expand your investment career, refer to some real transaction sharing every day, and learn some investment logic from others. Mate PRO does not engage in leading big brothers, success studies, or making quick money. It just shares the most professional content with heart, so that everyone can improve their investment ability every day without any effort. If you are also a person who takes investment seriously and wants to accumulate wealth with peace of mind, then you might as well come to mate PRO to experience it. New users can use it for free for the first 7 days, and all the content is open to everyone. If you don’t like it, you can unsubscribe at any time. Well, let’s go back to the history of 1996. The following figure shows the performance of long-term interest rates in 1995 and 1996. It can be seen that after the interest rate cut in January 1996, the long-term interest rate suddenly reversed slightly, soaring from 5.5% to 7%, which is actually a change in interest rate expectations. So why did the Federal Reserve suddenly turn around and stop cutting interest rates? In fact, behind this is the unexpected changes in the US economy. I don’t know whether the Fed’s two consecutive interest rate cuts have worked, or the US economy itself is very resilient. After entering 1996, various economic indicators began to rise uncontrollably, far exceeding everyone’s expectations. Both consumption and employment began to accelerate, and commercial investment also expanded rapidly, increasing by 12.5%, and the economically sensitive real estate market has achieved the strongest growth in more than 20 years. The entire US economy. It is completely free from the pressure of high interest rates, and it is a thriving scene. Such performance is also something that the Federal Reserve did not expect at the time. The figure below shows the comparison between the Federal Reserve's forecast for the US economy at the beginning of 1996 and the actual economy. It can be seen that at the beginning of the year, the Federal Reserve predicted that the US GDP would grow by 2.2%, and the unemployment rate would be 5.7%. In fact, this was the forecast given when the Federal Reserve planned to cut interest rates 4 to 5 times in a row, but in the end, we all know that except for the one interest rate cut at the beginning of the year, there was no further cut. Under such a high interest rate level, the actual GDP growth recorded in the United States was as high as 3.8%, and the unemployment rate was only 5.1%, which was much better than the initial forecast of the Federal Reserve. And Greenspan also realized it later. At the Federal Reserve's regular meeting in July, after maintaining the interest rate unchanged for more than half a year, he finally stood up and said that the Federal Reserve may now have to raise interest rates to control the current overheated economy. He said he was in a state of high monitoring. He must see that the economy is slowing down significantly in the near future, otherwise inflation is likely to revive. The following plot once again overturned everyone's cognition. The US economy continued to advance in the second half of the year, but inflation not only did not rise, but fell further. No one knew why at the time. It seemed that a mysterious force was stirring up the US economy. The Federal Reserve at the time even questioned the official data and specially brought in government officials to question it, but it ended in vain. So why is this? This does not conform to the most basic economic laws. People at that time did not see such a scene, but many years later when people went back to study that period of history, they found that the mysterious force that stirred up the US economy was actually the Internet. Under normal circumstances, if the economy is hot, it will definitely be accompanied by an increase in consumption, but there are only so many goods and services, so prices will naturally rise, leading to inflation. However, there is also such a special situation, if goods and services also increase significantly at the same time.Wouldn't that make it possible to achieve the effect of hot consumption but no price increase at the same time? This is exactly what the Internet brought about back then, which brought productivity improvement to the entire United States. Unlike our current feelings about the Internet, in the early days of the Internet, the Internet was more convenient for enterprises rather than ordinary people like us. The Internet really began to be popularized in 1994, and in early 1996, it was the golden period of its development. The enterprises at that time embraced the Internet just like the enterprises embrace AI now, which was something that had to be done no matter what. At that time, any management who did not take the initiative to embrace the Internet would definitely be punished by shareholders and the board of directors. In fact, the Internet did bring good results to these enterprises at that time, and this effect was mainly reflected in the cost reduction and efficiency improvement of enterprises. The most typical example is Walmart. Before the Internet era, Walmart's market share in the United States was less than 10%, but by 1996, its market share was close to 30%, and its operating efficiency was more than half higher than that of ordinary retail companies. The reason behind this is the Internet. Walmart is one of the largest companies that was most active in applying the Internet in the early days. For retail companies, the most difficult part is inventory management. With such a large daily cargo throughput, any efficiency improvement is a huge cost optimization. The Internet allows Walmart to exchange data with suppliers in real time, and track and adjust its inventory levels in a timely manner on a global scale. This not only greatly reduces the company's warehousing costs, but also greatly improves its delivery efficiency. This is a huge improvement for a global company like Walmart. Later, some studies even believed that it was Walmart that single-handedly stopped the signs of repeated inflation. And the contribution of the Internet is behind this. To put it bluntly, it is because of the Internet that Walmart can sell more goods and save a lot of costs on each batch of goods, which is a typical improvement in productivity. #美联储何时降息？ #杰克逊霍尔年会 $BTC $ETH $SOL