Non-farm payrolls: an important indicator for insight into financial markets
Many people are surprised at the powerful influence of a piece of data, especially a non-farm payrolls data, which can actually reverse the entire market trend!
First, we need to make it clear that the market originally expected three interest rate cuts this year. Coupled with the ETF event and the expectation of the bull-bear cycle, this led to the beginning of a big market trend. However, when the world situation changed dramatically, such as the signs of a rebound in inflation in the United States, this drastic adjustment came.
Why are the non-farm payrolls and unemployment rate so important this time? Because in the early morning of the day before these data were released, at the FOMC meeting of the Federal Reserve, Chairman Powell put forward several key points:
The next interest rate decision is likely not to be a rate hike (which means it is likely to be either a rate cut or unchanged);
He himself does not have much confidence in this year's rate cut (which releases a more pessimistic mood and further exacerbates market concerns);
Only when employment data is weak will a rate cut be considered (so the employment rate and unemployment rate are very important).
This meeting can be said to have poured cold water on the market's expectations of rate cuts. No rate cuts mean that market liquidity will further decline, and traders are more certain of the market's expectations of a decline. But when the non-farm payrolls and unemployment data were released, the situation reversed instantly. According to Powell's criteria for the possibility of rate cuts, the expectation of rate cuts this year suddenly increased significantly, so we witnessed the beginning of a big reversal in the market.
What will happen to the market next? We need to be clear that any financial market is very sensitive to overall economic policies. If future economic data, such as employment data, remain weak, then rate cuts will become a reality. Large-scale loose monetary policy will impact the entire financial market and further promote the bullish market. Therefore, we should cherish this opportunity.
Against this background, the bull market will return!
