There is really no suspense about the Fed's interest rate cut this time. Just now at the Jackson Hole Global Central Bank Annual Meeting, Powell's words instantly made the global financial market boil. He said that the time for policy adjustment has come and we will switch from a rate hike cycle to a rate cut cycle. As soon as this sentence came out, U.S. bonds of various maturities and the three major U.S. stock indexes rose straight, while the U.S. dollar index plunged directly. Friends, this is not a dream, the Fed's interest rate cut is really coming. So why did the Fed choose to cut interest rates at this time?
Powell gave two clear reasons. First, he is confident that inflation will return to 2%. The CPI in July has fallen back to 2.9%, which shows that inflation is indeed falling. Second, the Fed will do everything it can to support a strong labor market, which also reveals their concerns about the economy and the job market. Speaking of the job market, there is another big news. Last Wednesday, the United States revised down the non-farm employment base by 818,000, which is the largest downward revision in history. This shows that the U.S. job market in 2023 is not as strong as it seems. The data for 2024 must also be inflated, and signs of economic downturn have already appeared.
Powell's speech today is consistent with the content of the Federal Reserve's interest rate meeting in July that was previously disclosed. The minutes at that time mentioned that if the data meets expectations, it would be appropriate to cut interest rates in September. It's just that Powell's expression tonight is more direct and decisive. This is the rhythm of fully opening the interest rate cut mode. Now the market is not discussing whether to cut interest rates, but how many times and how large the scale will be. According to the data performance of the swap market, everyone now expects that each Fed will cut a total of 100 basis points this year. In other words, if it starts from September, it will be cut at least three times, and it will take 25, 25, or 50 to achieve 100 basis points. This is a considerable amount of interest rate cuts. So is the interest rate cut good or bad for the A-share market? The answer is good. Now the Fuji A50 Index is also rising. Although the increase is not as strong as that of the US stock market, it is good enough for the sluggish A-share market. This shows that the Fed's interest rate cut policy has a positive impact on the global financial market, including our A-share market. Friends, the Fed's interest rate cut is a big event. It will not only affect the US financial market, but also have a profound impact on the global financial market. For us investors, this is a once-in-a-lifetime opportunity. We must pay close attention to market trends and keep abreast of the latest economic data and policy changes in order to make more informed investment decisions.
So how should we deal with this rate cut cycle? I think we should first stay calm and not blindly follow the trend. Secondly, we should pay attention to changes in market dynamics and economic data, especially the inflation rate and the job market. Finally, we should formulate a reasonable investment strategy based on our risk tolerance and investment goals. Remember, investment is a long-distance race, not a short race. We must have patience and perseverance to win in this long race. At the same time, we must also see that although the Fed's rate cut is good news for the A-share market, market fluctuations are also inevitable. Therefore, we must maintain a cautious and optimistic attitude, seeing both market opportunities and market risks.
