The recent Federal Reserve's policy seems 'radically hawkish', but it may actually be a 'performance of expectation management'. Powell clearly mentioned that the dot plot does not represent actual policy but serves more as a 'warning signal to the market', aiming to curb market overheating and create more flexibility for future interest rate cuts.
The purpose of early cooling:
Hedge against future inflation risks: If 'King of Understanding' (Trump) returns to the political stage and pushes for radical economic stimulus policies and global trade barriers, the risk of inflation rebounding will surge. The Federal Reserve's current strong stance can lower inflation expectations in advance, reserving space for future policies.
Market valuations are too high: The Dow Jones Index and tech stocks are highly concentrated, and the market is at historical valuation highs. The Federal Reserve cools market enthusiasm through hawkish rhetoric to avoid forming asset bubbles and to reserve space for healthy future increases.
Opportunities are golden pits that emerge from declines
Asset assessment:
Behind the Federal Reserve's 'performance', market opportunities are actually emerging because the market has been suppressed by 'expectation management', leading to irrational price corrections.
The potential of oversold assets: Currently, assets like Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) have strong fundamentals and stable cash flows, yet they are excessively suppressed by the market, creating potential buying opportunities.
Asset allocation recommendation:
Gradual buying strategy: When the Federal Reserve unexpectedly cuts rates or the economy warms up in the future, the potential rebound of these assets could be astonishing.
Macroeconomic impact: Future policies and market trends
1. The initiative of monetary policy:
The management of the Federal Reserve's policy flexibility means that market risks and opportunities will highly depend on changes in U.S. economic data. Any signs of economic slowdown could lead to larger-than-expected interest rate cuts, promoting a rebound in risk assets.
2. Interaction between policy and politics:
If Trump returns, the U.S. may restart large-scale fiscal stimulus and trade protectionism, increasing market volatility but potentially accelerating policy shifts, thereby promoting asset increases.
3. Market expectation management:
Each Federal Reserve policy meeting is essentially a continuation of the market expectation battle. When the market expects only one rate cut, if it ultimately reaches three to four cuts, the market's reaction could be extremely intense, potentially triggering a new bull market.
Don't be misled by rhetoric; focus on actions.
Market corrections present good opportunities for asset allocation. Buying on dips is currently the most favorable strategy, entering gradually and adjusting as needed.
Focus on policy and economic indicators: The performance of the Federal Reserve's policies, GDP growth, and inflation trends are key indicators of future market fluctuations.
Are you ready to seize the opportunities in this grand performance of market 'expectation management'?
