When the Federal Reserve started its first rate cut this year, I mentioned that the steps of the Federal Reserve's rate cut seem to be proceeding in an orderly manner. They have cut a total of 100 basis points in three steps, from 5.25%-5.5% to 4.25%-4.5%. I previously stated that the median would be between 3%-4%. When it reaches that level, they will choose to neither raise nor lower rates, observing global market performance to decide on the next steps—this way, the Americans truly hold the upper hand, with all countries around the world having to look to them.
Another 25 basis points were cut in the early morning, and it seems we are not far from the target. Nevertheless, there is still room for interest rates to continue declining because they are already close to it; the Americans have no reason to keep themselves at a high level. But why is the market in despair? Because after announcing a 25 basis point rate cut in the early morning, the median of the dot plot rose to 3.9%. What does the dot plot mean? It is a prediction made anonymously by some Federal Reserve officials; each point represents one person's prediction. Their median forecast indicates that by the end of 2025, the interest rate will be around 3.9%. This means that, based on the current interest rate level, there may be at most two more cuts of 25 basis points. So the market is not upset about the rate cut in the early morning but is panicking over future expectations—thinking there will be no food to eat next year, they started worrying in advance.
As a result, U.S. stocks and Bitcoin naturally crashed, and of course, the RMB also fell—since the United States is not injecting liquidity anymore, and we just set the tone for large-scale liquidity injection, the RMB naturally couldn't hold up.
This big gift from the Federal Reserve can be said to be unexpected by the market. I previously said that the Federal Reserve would either not cut rates, and if they did, they would quickly bring themselves to a position that is both defensible and offensive. Therefore, from September to December is a sweet period. Indeed, during this sweet period, both U.S. stocks and Bitcoin have risen significantly, but the Federal Reserve also understands the market's thoughts. They didn't even give the last piece of candy—they are not hastening to lower interest rates to shock the market and then lower them again; rather, they are using the dot plot to directly influence market expectations—while getting closer to the established interest rate target, they have not let the market enjoy the last piece of candy.
But is this dot plot accurate? Obviously, this is just a tool for predictions, and it has a strong personal subjective bias, so it is certainly not accurate. However, it is not always inaccurate; it is just one of the tools at the Federal Reserve's disposal. You cannot treat it as a future reality, let alone as the basis for your personal operations—clearly, this time the dot plot was designed to facilitate a rapid reduction in interest rates to the target level without allowing the market to seize certain profits.
Some might say, 'I can't understand any of this; just tell me what it means for us retail investors and whether to go or stay.' Don't be like that; entering the market in such a way is very dangerous. There is an indicator in the market called the noise index. The larger the noise index in the market, the greater the profit potential; the smaller the noise index, the smaller the profit potential—if there are more people like you, there will be more noise, and the market will deviate further from normal prices for longer, making it easier for others to profit.
This time the Federal Reserve's big gift, I tend to think it is for Trump. Trump is known as a proponent of monetary easing, and next month he will 'take office.' A new official always brings enthusiasm; he will undoubtedly implement a series of people-friendly operations: tax cuts domestically, increased taxes internationally, reducing government layoffs and burdens, finding ways to boost employment rates, lowering inflation, creating a strong dollar, and possibly supporting the cryptocurrency industry—some of these goals have certain conflicts. To give him more room for policy maneuvering and more cards to play, the Federal Reserve's actions can be said to be well thought out.
I will irresponsibly predict that this wave of decline is a false drop, and a golden pit will appear. Once the market digests it, the interest rate in 2025 will certainly not just hover around 3.9%, and the median of the dot plot will also drop again after the first quarter of next year. At that time, many will be dumbfounded—wasn't it said that by the end of 2025 it would only drop to 3.9%? Because you didn't see that the packaging of Kang Shifu beef noodles says 'the image is for reference only'—that is the level that only Leeuwenhoek would be able to see.
And this grand gift can only be received synchronously with Trump by those who invest regularly and have money to increase their positions.