Last Friday, the global central bank governors’ meeting was held in Jackson Hole. The chairman of the Federal Reserve delivered a blockbuster speech at the meeting. The global capital market plummeted! It can be said to have given everyone a head-on blow.
The Dow Jones Index plummeted by thousands of points, Nasdaq fell more than 4%, setting the largest single-day decline in two months.
Federal Reserve Chairman Powell said that there is only one main task at the moment, which is to raise interest rates and fight inflation. As for talking about interest rate cuts, it is still too early. The market interpreted this as a hawkish signal.
In fact, this rebound in U.S. stocks and precious metals is not unexpected. It is mainly caused by the European interest rate hike and the slowdown in U.S. interest rate hikes, which caused the U.S. bond yields to plummet and the market expected it to become looser later. I never think that the Fed's policy will turn around. Even if the rate hike slows down, it will just put the brakes on. I don't know why many analysts actually think that the policy will turn around.
As for the current decline of U.S. stocks and precious metals, it is even less surprising. I made an accurate analysis on August 18, which was almost the highest point of this rebound:
Even if Powell acted dovishly this time To express my position, I think it is nothing more than rushing towards and diving into . After all, interest rate hikes are still going on, and the U.S. stock market bubble is still the largest in this century. This logic has not changed and is a cliché, so I won’t go into details here.
Currently, the United States is facing mid-term elections. Sleep King's approval rating has hit a new low, not only a new low for Sleep King himself, but also a new low for any American president at this point in time. An important reason behind this is inflation. The stock market is the lifeblood of the rich in the United States, but for ordinary people, there are only two economic indicators that have the greatest impact on happiness, one is the unemployment rate and the other is inflation. The Fed's misjudgment of inflation last year has caused a lot of dissatisfaction. It is understandable that it now prioritizes fighting inflation.
Before Powell gave a speech, the probability that the Fed would raise interest rates by 75 basis points or 50 basis points next time was 40-60%. After this hawkish speech, the market’s expectation became 64%. In fact, the change does not count. Too big. The plummeting market itself is just an over-understanding of this higher-than-expected rise. Generally speaking, the more violent the rise, the more violent the fall.
As for when the Fed policy will slow down, I think it may be next year. Although the current commodity has peaked and crude oil has fallen by 35% from its high, compared with historical prices, it is still considered high, and this has an obvious impact on inflation. Among commodities, there is another anomaly, that is, European natural gas . Last week, Russia announced pipeline maintenance, and European natural gas soared by 40%, continuing to hit a record high, driving the price of natural gas in the United States to also rise sharply. This will push up energy prices.
By the end of the year or next year, I think crude oil may fall below 80 US dollars. At that time, other bulk prices will also come down, and natural gas is mainly affected by Russia. Once the international situation slows down, it will fall quickly. Coupled with this year's high base, inflation will ease significantly, the Federal Reserve's policy next year will not be so aggressive.
