Interest rate cuts = bull market, this is a serious misconception.
As shown in the chart, reviewing the historical performance of the S&P 500 after the Federal Reserve cuts interest rates, the data clearly shows that rate cuts do not necessarily mean a bull market.
Everyone is expecting a bull market, holding onto their assets, waiting for the bull market to arrive.
Then, there is a high probability that the bull market will not come, or will be delayed.
The real bull market always erupts at moments you least expect,
not when everyone is eagerly awaiting it.
Why would the big players push up the market to get you on board for free?
The sharp rise of the U.S. stock market in recent years has been driven by two sources of liquidity: one is provided by low-interest currency carry trades (mainly in RMB and JPY), and the other is the bear market in U.S. bonds. Over the past two years, the U.S. has experienced a bond bear and stock bull market, while we have been in the opposite situation.
Now, in the environment of interest rate cuts, these two channels are reversing, draining liquidity. This is a very frightening thing. Moreover, this is happening amidst the chaos created by Trump.
What can the Federal Reserve do? After all the turmoil of this round of interest rate hikes, the rate cut last September was originally intended to find someone to buy in and start a tidal plan, but they have never found anyone.
If interest rate hikes maintain carry trades, the real economy cannot withstand it; if rate cuts save the real economy, then the current carry trade will collapse. This is a dilemma, and it is highly probable that the Federal Reserve can do nothing but talk.
"Rate cuts can cure a cold, but cannot save a terminal illness—if the economy is critically ill, the stock market will also be buried."—This classic quote was once said at a seminar on internet finance with Mayor Huang Qifan.
Brothers, look at the likes of Jensen Huang from NVIDIA, Bezos, Zuckerberg, Musk, Buffett, and other big shots, all of whom are selling stocks in large amounts, cashing out tens of billions, holding cash tightly, of course, to prepare for bottom-fishing after a big drop. What they are doing is not to speculate, but to wait until the situation becomes clear before taking action.
