Recently released U.S. non-farm employment data showed strong performance, significantly exceeding market expectations. Logically, this should be seen as a positive signal for economic improvement, which would benefit the stock market and other financial markets. However, the actual market performance showed a divergence, not rising as expected, but instead showing a downward trend. There is a deeper logic behind this phenomenon:
* Change in expectations and monetary policy: The strong non-farm data reflects a robust U.S. economic fundamental, which means that in the short term, the Federal Reserve may not need to take more aggressive easing measures, such as rapid large-scale interest rate cuts. Previously, the market widely expected the Federal Reserve to adopt an accommodative monetary policy, which equates to injecting a large amount of liquidity into the market (commonly referred to as 'flooding the market'). In an environment of abundant liquidity, funds often chase high-quality assets that can outperform inflation, thus driving up asset prices. However, the strong economic data has weakened market expectations for large-scale monetary easing, leading to a change in the flow of funds, which may be one of the reasons for the market decline. In other words, the market is not reacting negatively to positive economic fundamentals but is responding to the failure of the 'flooding the market' expectations.
* Long-term nature of the rate cut cycle: Once the Federal Reserve opens the rate cut channel, it is usually a long-term ongoing process rather than a one-time event. Investors need to adapt to and accept this long-term trend. In the long run, the rate cut cycle is beneficial to the overall market. This is similar to the long-term holding strategy in cryptocurrency investments. Investors should focus on the larger cyclical operating patterns; as long as the major trend does not fundamentally reverse, they should follow the trend.
* Divergence between value and price: Price reflects the market at a specific point in time and is easily influenced by short-term news, resulting in fluctuations. However, price fluctuations do not truly reflect the intrinsic value of assets. Value is the core factor determining the long-term performance of assets. Therefore, investors should focus on the long-term value of assets rather than short-term price fluctuations. Adopting a trend trading strategy and becoming friends with time often yields better returns than frequent short-term trading.
Summary:
The non-farm data released by the Federal Reserve itself is good news, indicating that the U.S. economic fundamentals remain strong. However, the financial market's reaction diverges from this, mainly due to changes in market expectations regarding monetary policy and insufficient understanding of long-term investment logic. Investors should pay more attention to long-term value and trends, rather than short-term price fluctuations and news impacts.