When the bullish lines of A-shares become more and more glaring, the lights in Federal Reserve Chairman Powell's office are probably on until dawn.

On the screen, the Shanghai Composite Index broke through 3400 points, and the ChiNext Index rose over 12% in a single month; on the other hand, the Dow Jones Index fell for three consecutive weeks, with tech giants in Nasdaq seeing their market value evaporate by 500 billion dollars. This man, who once stirred global capital with 'rate hikes and balance sheet reductions', has let his coffee go cold without taking a sip — he probably didn't expect that his stubborn refusal to cut rates would become the 'divine assist' for the Eastern market.

1. The 'golden window' in June that was wasted: The Federal Reserve could have 'set a trap' for the Eastern markets, but instead greedily turned it into a 'gift'.

Looking back now, June 2024 was practically a 'god-level operational opportunity' for the Federal Reserve, yet it was completely wasted by Powell's greed.

How perfect was the situation at that time?

  • The big A is lying at the bottom of 3000 points, with retail investors crying out in pain, and foreign capital holdings dropping to a three-year low;

  • Just as US employment data suddenly revealed a '50% drop in non-farm payrolls', inflation fell to 3.2%, and the reasons for cutting rates were laid out clearly;

  • The Hong Kong Hang Seng Index fell to 15,000 points, lower than during the 2008 financial crisis, with bloodied chips everywhere.

According to Wall Street's script, what would happen if rates were cut now?

  • US stocks can surge again on the 'loose expectations', allowing retail investors to pick up shares at high prices;

  • A massive influx of dollars will surge into the Eastern market under the guise of 'bottom fishing', first propping up A-shares and Hong Kong stocks, then reversing to sell when domestic investors chase high, reenacting the scene of 'foreign capital precisely escaping the peak' from October 2023;

  • They might even take the opportunity to bottom out quality assets in the East, tightening their grip on the economic lifeline.

But Powell just wouldn't. He slammed the table at the hearing and said, 'Inflation is not completely resolved', but then turned around in an internal meeting and told his aides, 'Wait a bit longer, let their real estate bubble burst on its own' — he wanted to do it all at once, wanting A-shares to drop back to 2800 points, and Eastern real estate companies to face debt collapse, ideally recreating the financial storm of 1997.

What's worse is the party's internal strife. He was afraid that after Trump came to power, he would be scolded for 'cutting rates to save his opponent', so he stubbornly kept the cards that should have been played in June tightly in hand.

2. Is it too late to cut rates now? The global capital is voting with its feet, and the foundation of dollar hegemony is loosening.

When the Federal Reserve finally announced a 25 basis point rate cut in September, the market's reaction was nothing short of 'face-slapping':

  • US stocks opened high and fell low, the Dow dropped 1.2% that day — capital votes with its feet: 'Cutting rates at this time seems more like admitting that the economy can't hold on.'

  • The RMB to USD exchange rate surged by 800 points in one go, rising from 7.35 to 7.27, with foreign capital net buying 12 billion through the Hong Kong Stock Connect in one day — money is crazily flowing towards the East;

  • What's even more heartbreaking is that Saudi Arabia announced 'settling 1 million tons of crude oil in RMB', and Brazil's central bank reduced its dollar reserve ratio from 80% to 58% — the 'petrol dollar' is rusting.

Why is it said that cutting rates now is 'too late'?

Just look at this set of data and you'll understand:

  • The number of new foreign capital accounts in the Eastern market surged by 230% year-on-year in the first half of the year, with 170 billion overseas funds quietly laying out in June alone;

  • The 'national team' in A-shares has long turned 3000 points into an 'iron bottom', with social security funds and insurance funds holding 1.2 trillion cash. Does foreign capital want to smash the market? They should first ask if these 'stabilizing forces' agree.

  • America's own debt bomb is about to explode: 33 trillion in national debt, with interest calculated at 4.5% requiring 1.485 trillion annually, higher than military spending; if rates are cut one step too late, interest payments could increase by several hundred billion.

Powell probably forgot that capital is the most ruthless 'profit seeker'. When the dividend yield in the Eastern market is 2.3% higher than US Treasury bonds, when the manufacturing PMI has expanded for six consecutive months, and when the export volume of new energy vehicles accounts for 60% of the global total — is the dollar going to flow here, or is it waiting to become a 'bag holder' in the US?

3. Is the curtain rising on 'the East rises and the West declines'? America's 'countermeasures' may be even more perilous.

Now Wall Street investment banks are all discussing a term: 'irreversible capital migration'. But America will never sit idly by; the following 'risk cards' may come into play:

1. Accelerating interest rate cuts + inflating US stocks, trying to 'retain capital with bubbles'.

Recently, Goldman Sachs suddenly called for the 'S&P 500 to reach 5800 points by the end of the year'. This isn't a prediction; it's clearly an attempt to pressure the Federal Reserve to 'open the floodgates', using the false prosperity of US stocks to trick capital into staying. But let's not forget, before the 2008 subprime mortgage crisis, investment banks were saying the same thing.

2. Implementing 'targeted financial sanctions' to strangle quality enterprises.

Just like when dealing with Huawei, the US may expand the 'entity list' in an attempt to use administrative means to prevent capital from flowing towards Eastern high-tech companies. But now the Eastern 'domestic alternatives' have already risen, with the self-sufficiency rate of semiconductor equipment rising from 5% to 38%. The more they strangle, the more they can force out independent innovation.

3. Stirring up geopolitical situations to create 'risk aversion'.

This is the trick the US is best at — creating a perception of 'Eastern insecurity' through local conflicts, compelling capital to obediently return to the embrace of the dollar. But now the world has seen clearly: the Eastern market is the 'stabilizer of manufacturing', and without its rare earths, batteries, and photovoltaic components, Europe and America can't even produce electric vehicles. Who would dare to truly drag this place into chaos?

To put it bluntly: capital flows never look at 'hegemony', only 'who can make money'.

The reason Powell was nailed to the 'pillar of shame' is not that he lowered interest rates too late, but because he misjudged his opponent — the Eastern markets are no longer the 'novice' that could only passively respond 20 years ago, but rather a player holding the three aces of 'manufacturing + market + foreign exchange reserves'.

When A-share investors no longer chase highs and sell lows, when the policy toolbox still has a bunch of cards like 'reserve requirement reduction, tax cuts, new infrastructure', and when the public's savings rate reaches 45% — the outcome of this 'capital contest' was already determined when Powell hesitated about whether to cut rates in June.

Let's talk in the comments section: do you think foreign capital will accelerate its inflow into A-shares next? Follow me, and tomorrow I'll dig into which sectors 'smart money' is secretly buying and how ordinary people can catch up with this trend.