Family! The Federal Reserve is once again 'hinting' at something, and this wave of signals directly relates to whether the digital assets in your hands can safely make it through the New Year! On December 17th, Federal Reserve Governor Waller said, 'The job market is weak; only a rate cut can save us,' which translates to not 'inflation has been defeated,' but rather 'the job market can't hold on much longer; if it keeps going, something big will happen!'
As someone who has been watching Federal Reserve policies for eight years, I need to share some insights with you. Don't just focus on that string of inflation data; the Federal Reserve's 'heart' has long been leaning towards employment. Currently, inflation hasn't dropped to the 2% target line, but Waller is bold enough to speak out. The core logic boils down to three points, which are key insights for us to judge market direction:
First, the 'cooling' of inflation is highly probable. Although the recent core PCE data in the U.S. did not meet expectations, commodity prices and service inflation are subtly decreasing, especially since the two pillars of energy and housing have stabilized. It's a certainty that inflation will decline in the coming months, so don’t be scared by short-term fluctuations.
Second, market expectations have long been 'stabilized.' This is the most critical point! Previously, everyone was afraid of an 'inflation spiral,' but now both businesses and consumers believe that inflation won’t surge crazily again. This 'anchoring effect' is a hundred times more effective than hard rate hikes, giving the Federal Reserve the confidence to ease up.
Third, the 'side effects' of high interest rates can no longer be hidden. Employment data looks okay? That’s just the surface! A bunch of part-time and low-paying jobs are included in the new jobs, while full-time positions have already started to decrease. For the Federal Reserve, high inflation is a 'chronic disease,' while employment collapse is an 'acute critical condition,' and the differences are obvious.
Speaking of our crypto circle, this matter has a huge impact! Don't listen to those 'big V' shouting 'bull market' randomly, and don't rush to cut losses. The Federal Reserve's current state of 'looking tough on the surface, but easing internally' makes it easiest for the market to experience a volatile trend. Funds are neither daring to rush in nor completely withdrawing, after all, no one wants to miss the opportunity before interest rate cuts.
So what is the biggest risk moving forward? I'll state my viewpoint directly: it’s neither a rebound in inflation nor both happening together, but rather a slowdown in employment! Why? If inflation rebounds, the Federal Reserve can just raise interest rates again, even though there will be a drop, but there is a clear expectation; however, if employment collapses, the market will fall into a panic of 'not knowing where the bottom is.' In such times, both stock and crypto markets are prone to irrational declines.
Lastly, a reminder for our fans: recently, don’t operate blindly chasing trends, focus on two key data points, the weekly initial jobless claims and the monthly non-farm payroll data, these two are the current 'indicators'. If you think my analysis is insightful, make sure to follow me.
