Recently, global stock market fluctuations have been as tumultuous as raging waves, leaving people breathless!
The sharp decline in the US stock market has almost wiped out all gains during President Trump's term. Just as the Asian stock markets opened on Tuesday, US stock index futures faced another severe drop.
We have a unique "market sentiment barometer" (i.e., the Fear and Greed Index), and after Monday's crash, the four major global markets fell into a state of "extreme fear."
This sudden collapse is largely due to Trump's statement that "the economy needs a transition," leading the market to mistakenly believe that an economic crisis is imminent. In the past, when faced with a significant drop in the stock market, the Federal Reserve would always step in to calm the market, but this time it chose silence. The stock market transformed from a slight decline into a sharp drop, yet the Federal Reserve remained silent, placing all the pressure on Trump.
The current situation is rather dramatic, with the market, the Federal Reserve, and Trump each acting independently:
The market wails: The stock market is plummeting, and the US economy is likely to collapse!
The Federal Reserve remains calm: The economic situation is good, and we do not need to lower interest rates to save the market for now.
Trump speaks ambiguously: The economic transition is indeed somewhat painful, but I will not clearly state whether a recession will occur.
In short, the market is in extreme panic, the Federal Reserve pretends to be calm, while Trump slightly reveals some truths, after all, everything is happening during his term.
The key point is! If there are two more drops similar to Monday's before March 20, the Federal Reserve may have to urgently cut interest rates in March. Historical experience shows that only when the Federal Reserve also begins to panic and takes measures to save the market will the market hit bottom and rebound, and it is clearly not at that point yet.
Last week, Federal Reserve Chairman Powell was still ambiguous, stating that the number of interest rate cuts this year could vary—potentially increasing or decreasing. However, after Monday's crash, the market is more convinced that interest rate cuts are imminent, and it is now widely expected that there will be three rate cuts this year (a total cut of 0.78%), one more than last Friday's expectations. Currently, the Federal Reserve and the market are engaged in a psychological game of "who will concede first."
