Brother Bee has always held the view that - sentiment determines the bottom, and capital determines the top.
From an emotional standpoint, Trump's victory in the election can be seen as opening the gateway to a bull market. However, from the perspective of liquidity, the market peak may still be early.
➤ September Dot Plot Prediction
Last night, the Federal Reserve lowered interest rates by 25 basis points as expected. If we follow the dot plot from September, the trend of interest rates is roughly as follows:
According to the September dot plot, the most likely prediction is that by the end of 2025, rates will be between 3% and 3.5%, and by the end of 2026, between 2.75% and 3%. After this rate drop, it will still be similar to the high points after rate hikes post-2013.
If we follow the September dot plot and consider the interest rate factor, the market peak may occur in 2026.
However, after Trump takes office, he is likely to intervene in the Federal Reserve's monetary policy again.
➤ Trump's Monetary Inclination
One cannot say Trump's monetary policy, only that his monetary policy inclination. Because the Federal Reserve is independent, and monetary policy is not within Trump's management authority.
However, Trump may pressure the Federal Reserve.
In 2018, Trump repeatedly pressured the Federal Reserve to prevent it from raising rates to higher levels.
In July 2019, the Federal Reserve unexpectedly began to cut rates, which may have been related to Trump's pressure.
So, in the future, after Trump takes office in 2025, he may again advocate for looser monetary policy.
Trump won in 2016 and took office in 2017; although interest rates were raised, a major bull market still occurred.
After 8 years, Trump wins again in 2024 and is about to take office in 2025, in an environment of high interest rates turning to lower rates, but Trump's monetary inclination may again affect liquidity and sentiment, driving a bull market.
➤ Transitional Phase
The next four months may be a transitional phase.
❚ Policy Transition
Firstly, since Trump may advocate for relatively aggressive rate cuts, it may deviate from the Federal Reserve's original rate cut pace. But in the previous months, did the Federal Reserve cut rates according to Trump's thoughts, or did it first stick to the original rate cut plan?
Focus on the December dot plot, and even the March 2025 dot plot.
The December dot plot, as a year-end prediction, may be more macro and strategic. (Based on the December 2023 dot plot, officials are most likely predicting the first rate cut to start in September 2024, which aligns with the actual situation).
The dot plot from March may gradually show the results of the game between the Federal Reserve and Trump.
Apart from the Federal Reserve, Trump's return may require transitional policies. Brother Bee does not understand politics, so I won't go into depth on this. However, my personal view is that there may be a transitional phase during Trump's early presidency.
❚ U.S. Stock Market Micro Bubble
From the perspective of price-to-earnings ratio, Yingchuanda currently has a price-to-earnings ratio of 69, approaching 70.
The Nasdaq's price-to-earnings ratio is 34.7, while the S&P 500's is 27.68.
They are somewhat high, although far less than in 2000 and 2008, but a rebound in the U.S. stock market is not impossible.
Of course, one cannot rule out the U.S. stock market continuing to push up bubbles, then going crazy with BTC to a peak and then breaking.
However, after experiencing 2000 and 2008, the market should avoid a repeat of history.
So, another possibility is that after the excitement of the election, during the stage before Trump takes office, and in the early transitional phase of his presidency, the U.S. stock market may pull back, and after consolidation, it may start to rise in sync with the real economy recovering after a period of rate cuts.
❚ Black Swan
Although we are about to enter 2025, raising the black swan issue at this time may not be very appropriate.
Although the probability of a soft landing for the U.S. economy is increasing, black swans and soft landings are not contradictory.
The internet bubble in 2000, the subprime mortgage crisis in 2008, and the pandemic in 2021 can all be considered black swans, and all initiated a certain degree of economic recession.
Events like the 911 incident in 2001, the 94 event in 2017, the Russia-Ukraine war in 2022, and Japan's interest rate hike in early August 2024... These events could also be considered black swans for the market but will not lead to an economic recession. However, they may cause market declines.
Some friends might say, 'If what you say is true, there could be a black swan at any time.'
However, Trump has previously stated that if he takes office, he has the confidence to end the Russia-Ukraine war and reduce inflation, so the possibility of a black swan cannot be ruled out.
After all, Trump is not a traditional Republican; he has some unique political views and strategies, which can be said to go against the norm. Especially during this transitional phase, caution may be needed.
➤ Final Thoughts
Overall, Trump is crypto-friendly; his monetary policy inclination is relatively loose, which is a favorable factor for the major bull market in 2025.
However, observing interest rate cuts, macro environment, and market liquidity, a main wave rise or a major bull market may still need some time, even with setbacks. Especially during this transitional phase before and after Trump takes office.
My personal analysis suggests three possible market scenarios ahead:
The first scenario is that the U.S. stock market and BTC continue to soar, BTC bleeds, without a altcoin season or a small-scale altcoin season. This continues until the first half of next year, followed by a slight recession in the U.S. economy, leading to declines in the stock market and cryptocurrency market, ending the bull market.
The second scenario is that the U.S. stock market and cryptocurrency market collectively pull back, or even experience a small black swan, with major players using this opportunity to dump and accumulate positions. Then, around the second quarter of next year, the bull market gradually starts, and the altcoin season arrives.
The third scenario is a combination of the above two, where both the U.S. stock market and BTC surge first, BTC bleeds, without an altcoin season or a small-scale altcoin season. This continues into the first quarter, then falls back due to event influences. Subsequently, as event impacts wane and rate cuts accelerate, the market restarts in the second half of the year, leading to a rotational altcoin season lasting until the end of the year.
The probability of the first scenario is relatively low. The second and third scenarios are difficult to predict because the difference between the two is whether there will be a wave of emotion-driven bull market at this moment. If there is a first wave bull market, it should be a trading emotion 'fantasy' market, where industry narratives and liquidity are not in place, and market sentiment can change rapidly and is difficult to predict.
Brother Bee leans towards the second option, possibly influenced by personal positions, currently at 60% position.
Unless completely out of the market, those who have built a bottom position might wait for an opportunity to enter. There's no need to be overly influenced by the current FOMO sentiment.
Friends on the spot, hold onto your chips. Those with high costs might consider partially reducing their positions during rallies, and buying back during pullbacks to reduce holding costs. Note that I said 'partial' reduction; for those who are not good at managing waves, operate with a small amount, don't mess around with large positions and end up losing them.
In short, the approval of ETFs and the entry of traditional financial capital will break the original fixed rhythm of the halving cycle, increasing uncertainty in volatility, and perhaps allowing for more flexible operations compared to previous bull markets.
Note: The so-called viewpoints are my subjective thoughts. I do not construct any contract trading suggestions; the goal is to provoke some thoughts for friends in spot investments, and this is not investment advice.
