The Necessity of the Federal Reserve's Interest Rate Cut
Weak Job Market
In July, non-farm employment increased by only 73,000, far below expectations, and the previous value was revised down, indicating that the actual state of the job market is worse than reported.
The unemployment rate rose to 4.2%, and the labor participation rate declined, indicating hidden pressures in the job market.
Increased Fiscal Pressure
The scale of U.S. national debt has reached $35 trillion, equivalent to 120% of GDP, with interest expenses approaching $1 trillion.
Lowering interest rates can alleviate fiscal pressure and avoid the accumulation of debt risks.
Market Reaction After the Federal Reserve's Interest Rate Cut
Stock Market Performance
Historical data shows that after interest rate cuts, the stock market usually experiences short-term fluctuations before reaching new highs.
Bitcoin increased more than tenfold within a year after the interest rate cut in 2020.
Commodities and gold
Commodities often perform strongly during interest rate cut cycles, such as copper, oil, and agricultural products from 2009 to 2011.
Gold and silver also typically reach new highs during each round of easing cycles.
US dollar index and capital flows
Interest rate cuts usually lead to a weaker US dollar index, with funds potentially flowing to the renminbi and emerging markets.
The impact of interest rate cuts on personal wealth
Borrowers and savers
Borrowers will benefit from lower loan interest rates, such as credit cards, auto loans, and mortgages.
Savers may face lower deposit rates and decreased purchasing power of cash.
Real estate market
The real estate market may freeze due to falling interest rates, with low transaction volumes and prices stagnating.
Asset allocation advice
Winners may be those who dare to use leverage, hold scarce assets, and are in markets with capital inflows.
Those who live on cash and are overly optimistic about interest rate cuts may become losers.
