The Federal Reserve's Shocking Turnaround!
Last night, the Federal Reserve's attitude changed dramatically, leaving global markets holding their breath. After Trump announced tariffs on automobiles, the market reacted sluggishly: U.S. stocks fell across the board, with the Nasdaq down 2%, while the dollar and U.S. Treasury yields rose against the trend. Meanwhile, gold and China's Shanghai Composite Index have remained unusually stable recently, with the Shanghai Composite Index peaking on March 19 and gold reaching its high the next day, with gold prices stabilizing at a high level and showing minimal fluctuations, resembling the calm before a storm.
The current market atmosphere is shrouded in gloom, with uncertain directions. The stimulating effects of economic data have weakened, and after the release of key data such as non-farm payrolls and CPI, the market remained calm, indicating that the world is experiencing a shift from focusing on the big picture to paying attention to details.
Frequent internal maneuvers within the Federal Reserve, with Powell stating that inflation caused by tariffs is temporary, aiming to soothe the market. However, other Fed officials are concerned about persistent inflation, with clear divisions in internal opinions. This divergence may be the Federal Reserve intentionally releasing a balanced signal to both prevent market chaos and warn of inflation risks.
This week, discussions about interest rate cuts have changed from a reluctance to cut rates to a stance of not cutting rates for a period of time. Chicago Fed President Goolsbee stated that the economic outlook is unclear and that a rate cut needs to wait, while St. Louis Fed President Bullard warned that the impact of tariffs on inflation may not be temporary, and maintaining the current interest rates is more prudent.
Not being in a rush to cut rates means still observing, with the timing uncertain, while stating that there will be no rate cuts for a period of time indicates that rate cuts will be shelved for the long term and will require significant events to trigger them. This is not just a play on words, but a reflection of the Federal Reserve's changing views on the economic outlook. The policy objective is no longer to pursue stability; observing comes with a cost.
As the market continues to change, we are closely monitoring the market to seize new entry opportunities.