When will the U.S. cut interest rates? Is there still a bull market to come?
First, let's organize the FOMC meeting summary from a few days ago:
1. Inflation remains very high.
2. The labor market is very robust.
3. Ultimately, the decision was to "keep interest rates unchanged."
If interest rates are to be cut, the two main criteria would be "inflation cannot be too high" + "non-farm employment declines significantly."
However, an important turning point has emerged; previous data was incorrect.
On 8/1, non-farm employment data was significantly revised downward,
The growth of the labor market is the weakest since 2010.
Because of this, Trump dismissed the Secretary of Labor,
And the data was indeed too poor, leading to a sharp drop in U.S. stocks and the cryptocurrency market.
The most likely scenario is:
Poor employment data → Sharp decline in U.S. stocks → Bitcoin ETF also sees reduced holdings → Institutions follow suit and sell off → Retail investors panic → Financial market crashes → Interest rate cut in September.
This is also why I believed that August would see an unexpected major drop, and that a black swan event would occur. Interest rate cut
After the crash, it conveniently aligns with the "two criteria" I mentioned above,
So there is a very high probability of an interest rate cut in September.
In simple terms, this month might be quite tough,
But before the tough times, there may be a wave of rise that tricks people into getting on board, possibly using the expectation of an interest rate cut to deceive retail investors, who would then experience a big drop after getting in.
After the drop, an interest rate cut will be announced in mid-September, followed by the onset of a crazy bull market.
