The black swan is coming!The Fed turns hawkish again?Powell took out the killer weapon?Is the U.S. debt a stubborn disease?
Recently, the originally bullish U.S. ** market suddenly collapsed sharply, and the three major indexes fell by about 15%, confusing investors around the world. Behind this abnormal fluctuation seems to coincide with the good news released by the Federal Reserve.
Recently, the United States** has experienced a series of volatility that has caused investors to be troubled. Originally, due to the good inflation data in October and November, as well as the expectation of a "soft landing", the United States **all the way**, and even hit a new high this year.
However, in the latest late trading, the United States ** suddenly appeared**, and the Nasdaq index fell by 15%, leaving global investors at a loss. Is this sudden situation related to Fed policy?How will monetary policy be adjusted in the future?Let's take a closer look at this topic.
In recent years, the United States has been plagued by inflation, which has forced the Federal Reserve to raise interest rates several times. Fed Chairman Jerome Powell has repeatedly stressed that curbing inflation is the primary goal, and the goal is to keep inflation below 3% and avoid a stagflation crisis.
However, with October inflation data beating expectations, Powell announced a pause in rate hikes at the 13 December meeting and hinted that the possibility of a rate cut has begun to be discussed internally. As a result, the market began to speculate that the Fed may pause its rate hike cycle and start a rate cut cycle soon.
The cessation of rate hikes and rate cuts has had a positive impact on both the US** and the bond market. As a result, we see the U.S.** continue to lead the rally and hit new highs. Since the end of October, the NASDAQ** has exceeded 15%, and investors have made a lot of profits. The index continues to climb, and the market boom is in full view.
Recently, there has been an abrupt change in the direction of the Fed's policy, and many ** have begun to disagree with Powell.
For example, the presidents of the Chicago Fed and the Richmond Fed have both said that while inflation is currently relatively well controlled, they have not met their 2% inflation target, so they are reluctant to discuss future rate cuts too soon.
Even Wall Street reporters, who have long been regarded as the mouthpiece of the Federal Reserve, have publicly stated that the Fed's current attitude has become ambiguous, making it difficult to cut interest rates at the same time and in what magnitude. This means that the previously set rate cut plan has become uncertain.
The expected interest rate cut suddenly ran aground, a bit like the release of good news by listed companies and then denied it, which led to a sell-off in the market, triggering *** This is also one of the reasons for the sudden decline in the United States.
In addition, the sudden emergence of liquidity problems in the U.S. bond market has also become an important negative news. On Wednesday, the U.S. Treasury issued another $13 billion in 20-year Treasury bonds to increase U.S. liquidity. This is seen by the market as a major test of the liquidity problem of US Treasuries.
Sure enough, the latest round of auctions for US Treasuries was once again a test. Due to low demand, the winning interest rate on the 20-year Treasury note reached 4213%, compared to the previous interest rate of more than 5%, this is undoubtedly an improvement. However, 1The tail rate of 5 basis points is still emerging.
The presence of tail rates means that fewer investors are buying U.S. Treasuries, so the Treasury must raise interest rates to attract more investment. This time the tail rate was the largest in more than a year, underscoring the weakness in demand for US Treasuries.
Both the overseas demand index and the domestic demand index of US Treasury bonds have hit record lows, indicating that US Treasury liquidity is facing problems.
As a result, after the auction ended, the US Treasury market saw a slight ** and interest rate data rose;About an hour later, the United States **also began**. This shows that the U.S. bond liquidity crisis is actually a key reason for the collapse of the U.S. market.
According to yesterday's U.S. economic data, if there is a black swan that caused a rare sudden decline in the U.S., the most likely reason is the Fed's "change in expectations".
As investors generally believe that Powell, the Fed's biggest proponent of rate hikes, has changed his stance, the market has begun to speculate on the expectation that the United States may cut interest rates, which is essentially equivalent to exerting pressure on the Fed to cut interest rates in advance.
However, the reality is that the Fed's context is not so easy to grasp. At present, the Fed's position on whether to cut interest rates is still vague, which has also led to panic in the US market.
Of course, there are also experts who believe that other Fed chairs are doing it wisely.
Because the Fed should not act too soon only until US inflation is completely below 2%. After all, the United States has been mired in a stagflationary crisis, experienced nearly 10 years of economic recession, and the painful lesson of stagnation.
Therefore, if the US falls into a recession, the most it can do is loose monetary policy and lower interest rates.
And when the inflation crisis has not been fully resolved, stimulating economic growth by cutting interest rates is equivalent to a healthy body hiding potential long-term problems. Such an approach could lead to a "sick reboot" of the U.S. economy.
Fed Vice Chair Williams believes that keeping interest rates high is still necessary, a view that has caused controversy among many Feds.
While Fed Chairman Jerome Powell has chosen a position of ** when considering political factors, other Fed chairs have sent hawkish signals. This suggests that many voting rights** remain convinced that the Fed will continue to maintain the current high level of interest rates only if US inflation falls below 2% to fundamentally address the inflation crisis.
The U.S. Treasury crisis is difficult to solve, leading to a further acceleration of the de-dollarization trend. Overall, it is no accident that this round of U.S. stocks has sharply **. The change in expectations from the Federal Reserve** and the continued evolution of the Treasury liquidity crisis caught the market off guard. Therefore, it is not an accident that the US stock market sharply ** in late trading.
In my opinion, inflation is now effectively under control, and the Fed is likely to cut interest rates in the near future, either in March or May. However, the key issue remains the creditworthiness of US Treasuries and the hegemony of the dollar.
The United States is facing two serious economic problems, namely the national debt crisis and the liquidity crisis, which are like the two stubborn diseases of the American economy.
If the Fed is unable to effectively solve the Treasury problem and the liquidity of US bonds, the influence of the US dollar hegemony will continue to weaken, and the US dollar credit will continue to suffer.
Although U.S. sanctions and threats against China may slow down our development, in the battle between China and the United States for sanctions and counter-sanctions, the pace of internationalization and de-dollarization of the Chinese currency will spread rapidly around the world. More and more countries will join the wave of de-dollarization because they are alert to the US debt crisis. This process will continue to ferment on the international stage, triggering more countries to take action.