On December 1, local time, Federal Reserve Chairman Jerome Powell said in a speech at the Spelman Institute in Atlanta that policymakers will be cautious about future monetary policy decisions, and if inflation is needed, the Fed will raise interest rates again, and it is too early to speculate when policy may be eased.
"So far, the Fed is moving cautiously because the risks of undertightening and overtightening are becoming more balanced," Powell noted. It is too early to conclude that our position is sufficiently restrictive, or to speculate on when policy is likely to be easing. He further added, "We are prepared to tighten policy further if appropriate." ”
Powell further noted that the current level of inflation is still well above the Fed's 2% target. He cited data that core inflation grew at an annualized rate of 25%, while the low inflation data of the past few months is welcome, to reach the target level of 2%, means that this progress must be sustained. Among them, Powell is full of confidence in inflation this time, and he believes that the Fed is expected to bring inflation down to 2% without causing mass unemployment.
Powell's public speech was an attempt to pour cold water on the market's recent surge in interest rate cut expectations, but the effect was limited. "They're not going to raise rates again, they're done raising rates", that's what the market is thinking at the moment. More importantly, what is currently being traded in the market is the expectation of a rate cut.
After Powell's speech, Nick Timiraroos, a well-known journalist known as the "New Fed News Agency", wrote an article to share his latest research, he believes that the Fed has ended raising interest rates, but they are reluctant to say so. Timiraroos writes that the Fed is "increasingly convinced" that they don't need further rate hikes to tame inflation, but the current optimistic situation is still not enough for them to announce the end of rate hikes, let alone "start talking about rate cuts."
Looking ahead to the December policy meeting, Timiraos said the bank expects to maintain the benchmark interest rate at 5 for the third time in a row25% to 55% and reiterating guidance that "a rate hike is more likely to be followed than a cut".
The Federal Reserve will hold its last interest rate meeting of the year on December 12-13, and the Fed is widely expected to keep rates unchanged for three consecutive times. Wall Street market participants widely believe that the Fed's current rate hike cycle is over, and some are optimistic that policymakers will cut interest rates in the first half of next year, which supported the sharp November in the United States.
On December 1, the three major U.S. stock indexes collectively closed higher, all recording the fifth consecutive week**;;The Dow and the S&P 500 both hit record highs for the year**. As of **, the Dow Jones rose 082%, and the S&P 500 rose 059%, the Nasdaq rose 055%。
Global investors are selling the dollar at a pace not seen in the past 20 years, amid rising expectations of interest rate cuts. On November 24, the Financial Times reported that State Street, the world's largest custodian bank with $40 trillion in entrusted assets, revealed that global asset managers were close to selling 16% of the dollar position, which is the highest pace of "selling the dollar" since November 2022.
According to State Street, there have only been six times in the past 20 years that global asset managers have sold the dollar so violently, most recently in November last year, when the dollar index fell about 10 percent. In this round of sell-off, which began in November, the dollar index fell by about 3%, the largest monthly decline since November 2022. The offshore renminbi rose nearly 1,700 points against the dollar in November, the biggest month since November last year.
The last time there was a serious divergence between the market and the Fed occurred in early 2023, and soon after, in March 2023, the U.S. banking crisis broke out, and the Fed was forced to temporarily expand its balance sheet by about $300 billion to provide liquidity for the banking industry, driving global assets to be cleared**.
As of November 29, the Fed's balance sheet performance has shrunk to $77,961 trillion, but in the two weeks from 15 to 29, the reduction has narrowed significantly, with a total of only $18.8 billion in the two weeks. Will history repeat itself?This is something to think about.
Former Federal Reserve Chair and current U.S. Treasury Secretary Janet Yellen said at an event this week that the U.S. recovery is gradually turning into sustainable growth, and more needs to be done to deal with inflation and economic problems. But she does not see the need for further aggressive monetary policy tightening. This also fuels the frenzied betting in the market.
But at the same time, often when panic or greed is extreme, we should always be vigilant against the extreme. This is the wisdom left by the ancients, and it is also the embodiment of the laws of nature. In this world, whether it is people, things or things, there are certain scopes and limitations.
If you look at it from the perspective of the top financial groups on Wall Street, with the help of the Fed's tightening cycle, what needs to be completed is wealth harvesting, supplemented by geopolitical turmoil as a cover, the energy crisis brought about by the war in Ukraine has put Europe in a difficult situation, but at present, a major crisis has not yet occurred in some economies with a certain size that can be harvested on the periphery, and it is far from the Fed's easing cycle. On the contrary, the long time since the war in Gaza has settled has left the United States with a serious loss of global morality and has become a burden.
On November 29, local time, according to foreign media reports, there are less than two months left before the voting in the U.S. primary, and Wall Street leaders have set their sights on the two basically confirmed candidates, Biden and ex**Trump, hoping that other competitors with low current support ratings can shake the United States in 2024.
JPMorgan Chase CEO Dimon said on Wednesday that voters should support former South Carolina Gov. Nikki Haley for the Republican nomination to prevent Trump from winning the election. Ackerman, the founder of Pershing Square, said on Tuesday that Biden should give the sage to the newcomer. Pushing other candidates at the last minute is unlikely to change the outcome of the nomination, but the desire for a new candidate highlights the deep dissatisfaction that many voters have with Biden and Trump.
Musk said he would not vote for Biden. At the moment, it seems that both Trump and Biden are disliked by Wall Street, but in the polls of both parties, Trump and Biden are both significantly ahead of their opponents in the party.
In the author's opinion, the current round of the Federal Reserve's aggressive interest rate hikes and quantitative tightening, the external market has not yet thundered, and there is no way to cut it, which makes the top financial groups on Wall Street more and more dissatisfied, and to some extent, it is closely related to Biden's global geostrategy. And during Trump's tenure, he and Wall Street were not dealing with each other in the first place. The United States in 2024** is subject to change.
As the divergence between the market and the Federal Reserve deepens, the dollar index and U.S. Treasury yields continue to fall, U.S. stocks are soaring, international gold prices are approaching record highs, OPEC+ cracks are occurring, and international oil prices are up and down.
Pessimists take a conservative approach when judging future megatrends, out of risk considerations. Therefore, pessimists are always right, but opportunities belong to optimists, who are good at spotting the big opportunities behind the risks. Recently, the author saw that some investors on the Internet complained that the past ten years have been ten years of regret, and how many decades are there in lifeIn the second half of the Fed's tightening cycle, both risks and opportunities will be magnified, which requires people to learn to broaden their international perspectives and not put their eggs in one basket.