The folks at the Federal Reserve, especially Powell, must be pulling their hair out right now. They originally planned to stubbornly hold off on interest rate cuts, hoping to suppress our market with high rates, but the A-shares completely defied expectations and continued to surge.
Many people have come to realize that the most suitable window for a rate cut was actually this June: at that time, A-shares were at a low point, U.S. employment had already shown signs of trouble, and inflation was relatively stable. If they had decisively cut rates then, the U.S. stock market wouldn't have weakened so quickly, and they could have seized the opportunity to buy A-shares and Hong Kong stocks at low prices, just like last October when they first rallied and then let retail investors take over, all while keeping the eastern economy in check.
But Powell didn’t budge; on one hand, he was too greedy, thinking our real estate market could collapse on its own or waiting for A-shares to return to their previous lows; on the other hand, he was caught up in party politics, wanting to completely abolish Trump’s old policies. In the end, despite his careful calculations, he ended up with nothing.
So I’ve always believed that June was the best time for a rate cut; I really didn’t expect him to drag it out until now. Now, cutting rates again would have diminished effects. He may end up solidifying the title of 'Mr. Too Late.'
Moving forward, it’s highly probable that they will accelerate the pace of rate cuts, trying to remedy the situation. After all, if global funds really start to flow eastward at an accelerated rate, or even show a trend of withdrawing from U.S. stocks to invest here, it would mean that the 'East rises while the West declines' pattern is taking shape. Coupled with the massive debt pressure in the United States and a rate burden of as high as 4.5%, if U.S. stocks, bonds, and the dollar all collapse at once, it would lead to catastrophic consequences. To avoid such a scenario, the Federal Reserve will certainly do everything it can to accelerate rate cuts while simultaneously propping up dollar assets to prevent capital from completely flowing to the east.
