Performance of major global assets after the US interest rate cut.
On September 18, the Federal Reserve announced a 50 basis point rate cut, marking the first rate cut in more than four years and exceeding expectations. This news was like a boulder thrown into the financial lake, triggering a chain reaction around the world.
The United States has started a cycle of interest rate cuts, which has affected major assets around the world like a flood, causing a general rise. After the Fed cut interest rates, many major countries followed suit. China has adopted a series of policies to stimulate economic development, including lowering the reserve requirement ratio and interest rates, lowering mortgage rates, and a series of economic stimulus policies to boost the domestic economy.
Due to the status of the US dollar as the world's dominant currency, regions with a high degree of financial openness tend to keep interest rates in step with the Federal Reserve. For countries or regions that are fully pegged to the US dollar, such as the Hong Kong dollar, if the US cuts interest rates, the Hong Kong government will have to follow suit, otherwise the arbitrage funds brought by the interest rate differential may quickly destroy foreign exchange reserves.
1. Crypto assets
At present, crypto assets, especially Bitcoin, have become highly US-based. After the US announced a rate cut, Bitcoin rose overall, up 5.03% at the end of trading to $63,165. As of September 30, the highest price of Bitcoin in a single day was nearly $66,000, and the current price is stable at around $63,000. The total market value of cryptocurrencies has also risen, from nearly $2.2 trillion on September 18 to $2.4 trillion.
2. A shares
China quickly followed the Fed’s announcement of a rate cut, and the People’s Bank of China cut the reserve requirement ratio and interest rates simultaneously on September 27. In the stock market, in less than ten trading days, the A-share market broke through from 2,700 points to 3,300 points. On September 30, the last trading day before the National Day holiday, the A-share trading volume continued to increase, and the total trading volume of the Shanghai and Shenzhen stock markets exceeded 2.5 trillion yuan, setting a new record.
3. European stock markets
The European Central Bank began to cut interest rates in June, earlier than the United States announced this time. After the Fed cut interest rates, the Bank of England said it would keep interest rates unchanged. European stock markets closed higher, with the European technology sector leading the gains by more than 3.4%. France's CAC40 stock index closed up 2.29%. Germany's Dax index opened sharply higher after the announcement of the rate cut, breaking the 19,000 point mark for the first time. The UK's FTSE 100 rose more than 1.25%, and the Dutch AEX index closed up 1.77%. As of September 30, except for the FTSE 100, which fell back after reaching a high on September 19, several other stocks were still in an upward trend.
4. US stocks
The U.S. stock market closed down collectively on the day of the rate cut. Affected by the investment strategy of "buy news, sell facts", the three major indexes of Dow Jones, S&P 500 and Nasdaq fell by 0.25%, 0.29% and 0.31% respectively. In the foreign exchange market, the U.S. dollar index also showed a volatile reversal trend on the same day, and finally fell slightly by 0.08% on the same day. On the day after the Fed cut interest rates, U.S. stocks rose across the board, with the S&P and Dow closing at new highs. The Nasdaq rose by more than 3.1%, the Dow rose by nearly 658 points, and the S&P rose by nearly 2.1%. The S&P set a record closing high for the first time since July, small-cap stock indexes rose for seven consecutive days, and Chinese stocks outperformed the U.S. stock market.
Conclusion:
At present, it has been less than half a month since the Federal Reserve announced the interest rate cut. Most of the world's major assets are in a rising trend that is in line with the theory. The massive money supply will promote a bull market, but it will also give rise to bubbles. Investment requires rationality. It is difficult for people to make money beyond their own cognition. In the face of the general rise in major global assets, choosing a market that you are familiar with to bet on and strictly implementing your own trading strategy may be a safe investment. The US election in November is also an uncertain factor that affects the market outlook.
