The market thermometer has quietly risen before September. Currently, 83% of investors are tiptoeing and looking out, convinced that a rate cut by the Federal Reserve will add fuel to the bull market—as if pressing the rate cut button will extend the upward curve steeply. But behind the excitement, a more thought-provoking question arises: is this collectively anticipated rate cut the last dessert of a feast or the appetizer of a new round of market activity?
The answer may lie in the word 'expectation'.
In the past few months, the market has repeatedly rehearsed the script of 'September rate cut'. Many of those rapidly rising asset prices are suspended by the invisible thread of 'rate cut expectations'. It's like a movie that has been spoiled in advance; when the actual rate cut occurs, the 'new story' that supports the market may suddenly come to a halt. The moment the good news is realized, it may very well become a turning point of 'buying expectations, selling facts'—the hotter it was before, the colder it may become after. What is even more concerning is that if economic data suddenly turns, the current rate cut may even become a 'brief respite', with subsequent rate hikes and the shadow of a bear market potentially returning.
More troublesome than 'good news is fully priced in' is the counteraction of 'expectations being too high'. When almost everyone believes Powell will raise the flag for a rate cut, historical experience often reminds us: market consensus is the easiest to be broken. In the 1980s, Volcker was known for his 'iron fist against inflation', and even when the market was in despair, he would not hesitate to raise rates when necessary. If Powell chooses to 'replicate the toughness' this time and refrains from cutting rates under market pressure, those funds betting on a rate cut will instantly change their stance; just as rapidly as they rose, they could fall just as hard.
Of course, the plot could also turn due to a variable—Trump's 'unconventional card'. Even if the Federal Reserve remains inactive, if he returns to the White House, he may not follow the usual path. Historically, his obsession with 'market heat' has never been concealed, and measures like indirect monetary easing and policy stimulus could become options. Once this 'extraordinary operation' is implemented, it might extend the bull market cycle, breaking the 'four-year cycle' of the market, transforming what was originally a possible endpoint into a new starting point.
Ultimately, the key point in September is not whether there will be a rate cut, but that the 'turning point' has arrived. It may either be the last dance of a celebration or the traffic light signaling a change in trend. The market is never afraid of change; what is feared is treating a one-sided market as eternal, still holding on to an outdated script when the turning point arrives.
Rather than guessing whether the market will rise or fall, it's better to prepare enough resources to cope—after all, those who stand firm in the storms are not relying on weather predictions but have already prepared their ships and anchors.
