Clement Ringwood Kc4t

Three black swans are about to strike next week! The global capital markets are likely to face another blow!

Right now, the biggest concern in the global capital markets is that the US dollar index is above 110, like a rising water level that is about to drown us. If the US dollar index exceeds 110, major global assets will surely experience a significant decline, and next week we could see three consecutive black swans driving the dollar index higher.

The first black swan is that the Bank of Japan is going to raise interest rates again. At the end of January, the Bank of Japan will hold a monetary policy meeting, but last week, the Bank of Japan did not provide any guidance to the market. So everyone's focus is on the last window period next Tuesday, where Bank of Japan Governor Kazuo Ueda may communicate with the market. If the Bank of Japan releases hawkish news during this communication, it is likely that they will raise interest rates, and the market will be severely impacted.

The second black swan is the expiration of the US debt ceiling, which many might think is an old story that keeps repeating. However, I remind everyone that even if the debt ceiling is resolved on time, it will not be beneficial for the market but rather detrimental. Because once the debt ceiling is resolved, the US will issue bonds in a rush, which will absorb liquidity from the market and drain excess money, leading to a chain reaction of liquidity crises in US stocks, commodities, and other assets.

The third black swan is the US inflation CPI, which the market is most concerned about and is set to be announced next week. The CPI for December is expected to rebound again. Although this rebound is largely due to the low base of last December's CPI, the market is currently on edge. Because those struggling feel they must hold onto the Federal Reserve's interest rate cuts, which they view as their only lifeboat, but this lifeboat is already leaking.

After last week's non-farm payroll data exceeded expectations, many believe that this year the Federal Reserve will likely only cut rates once, or even not at all. So which of these three black swans will penetrate the market next week? I will provide real-time updates and follow Old K as he guides you through the interest rate cut cycle.