The election results will not affect rate cuts.
The Federal Reserve cut rates by 25 basis points at the November meeting, in line with market expectations. I personally believe that the outcome of the U.S. presidential election will not have too much impact on the Fed's recent policies.
Firstly, because the timing and ultimate strength of Trump's policies still have uncertainties.
Secondly, the impact of these policies on inflation and employment is yet to be observed. The Federal Reserve will not guide future interest rate paths based on speculation; aside from election factors, the Fed is satisfied with the current pace of rate cuts.
Based on the assumption that there is still room for inflation to decrease, I personally predict that the Federal Reserve will continue to cut rates, and the policy rate will be lowered to a neutral level of 3.75% to 4% by the end of the second quarter next year.
The basis for the Federal Reserve's rate cuts lies in slowing inflation. I predict that under improvements in supply-side factors, inflation will enter the 'final stage' of decline by 2025. The year-on-year growth rates of core CPI inflation at the end of the four quarters are expected to be 2.9%, 2.6%, 2.7%, and 2.6%, with the inflation center elevated compared to pre-pandemic levels. Based on this assumption, we expect the Federal Reserve to continue to push for the normalization of monetary policy, calibrating the policy rate to neutral levels.
In the baseline scenario, the Federal Reserve will cut rates by another 25 basis points in December, and then by 25 basis points in the first and second quarters of 2025, before stopping rate cuts. By the end of the second quarter of 2025, the federal funds rate will decline to 3.75% to 4%, which is about 150 basis points higher than the neutral rate before the pandemic. This means that the pattern of high U.S. rates remaining for a long time has not changed; low rates are not the background of this era.
Is the cryptocurrency market really entering a bull market?
Bitcoin has performed very strongly during this time. The Federal Reserve is cutting rates, and the 'Trump trade' is gradually pushing Bitcoin to new historical highs.
The current issue is not whether Bitcoin can reach 80,000 or higher, but rather that the rise is too rapid, and most altcoins cannot keep up. If it continues to rise at this pace, it will create an illusion of prosperity, and then it will have to fall back. Enjoying the benefits is a slow bull market.
Bitcoin does not necessarily need to rise quickly, but other altcoins should also rotate and grow; sharing the benefits evenly will form a slow bull market, rather than just focusing solely on Bitcoin.
Currently, many people in the market are speculating on concepts and buying expectations based on news, indicating that the market has not returned to normal and actually feels more fragile.
I do not deny that the cryptocurrency market will welcome a bull market. Based on the policies already released on the current market and the trends in the cryptocurrency market before this year, it indeed suggests that a bull market is approaching; the only current concern is that Bitcoin's rising speed is too fast, and most of this increase is due to news-driven stimuli; if any unfavorable news for the cryptocurrency market arises, the 519 incident will reappear before us, requiring extra vigilance.
