The most exciting thing in the financial world this week is undoubtedly Federal Reserve Chairman Powell's speech at the Jackson Hole annual meeting. This gathering of global central bank bigwigs is like the final all-in at a poker table—everyone is betting on whether Powell will throw out the "rate cut bombshell." Especially those folks on Wall Street, some have directly bet $10 million on a 50 basis point rate cut in September, with a potential profit of $100 million. This is much more thrilling than stock trading.
Although the latest PPI data shows that inflation is a bit stubborn (July PPI rose by 0.9% month-on-month, hitting a three-year high), the market doesn't seem to care. Now, 80% of the gamblers are betting that there will be a 25 basis point rate cut in September, and some even think there might be a direct cut of 50 basis points. However, it should be noted that this week's U.S. non-farm payroll data has been significantly revised down, with a total of 250,000 jobs lost in May and June, and only 73,000 new jobs created in July. This data is enough for the Federal Reserve to have a drink.
Powell's speech is like Schrödinger's cat; the market has already bet on two scenarios: if he releases a dovish signal of "let's cut rates quickly," global stock markets and Bitcoin might have a collective celebration; if he continues to resist inflation and adopts a hawkish stance, the bond and stock markets may go on a roller coaster ride. Even JPMorgan has noticed that many investors have shifted from "full speed ahead" to "let's wait and see," all worried that Powell might suddenly change his mind.
The most exhilarating action is in the cryptocurrency market. If a rate cut becomes reality, Bitcoin might soar again, but if Powell insists on fighting inflation, these digital golds will also tremble. However, seasoned investors know that sometimes the market is like the boy who cried wolf—when the rate cut news finally hits, it might actually lead to a plunge. Just like in May this year, when Powell just said he would fight inflation, the U.S. stock market dropped over 300 points the same day.
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