Text/Editor: Ride Hanhan to cook
For the majority of investors, the Fed has always been seen as a bellwether. Its every move touches the nerves of the market. Especially in these turbulent times, the Fed is in the spotlight.
Just when everyone was eagerly awaiting and eagerly expecting the Fed to give a new round of interest rate cuts "timely rain", the Fed seemed to have changed as if it had changed its "savior" posture, and instead poured cold water on the market one after another. What the hell is going on? What's the mystery behind it?
First, let's review the recent series of comments from senior Fed officials. On October 10, after the release of the new inflation data, a number of Fed officials who were in favor of cutting interest rates showed subtle changes in their rhetoric.
Among them, the statement of Atlanta Fed President Bostic is the most eye-catching. The Fed "bigwig", who has always been known for his hawkish stance, actually publicly said in an interview that he was "completely relieved" that he would pause interest rate cuts in November, citing the latest hot employment and inflation data, which provided a basis for this.
You know, just a week ago, Fed Chairman Jerome Powell hinted at avoiding cutting interest rates too quickly. Now there is another Bostic contradiction, which is clearly the Fed's intention to cool down the overly optimistic market, telling them: interest rate cuts may be paused before the end of the year, so you should have less unrealistic dreams!
So why did the Fed suddenly change its face and pour cold water on the market? In the final analysis, it is still profit-driven. In the United States, as the midterm elections approach, whoever is elected will inevitably push up spending, exacerbating inflation and debt. And if the Fed blindly cuts interest rates, it is tantamount to adding fuel to the fire.
What's more, from the perspective of the international market, the continuous interest rate cuts have also put pressure on the dollar, resulting in a large amount of international capital withdrawing from United States assets. According to the data, the current international inflow into United States is as high as 36 trillion US dollars. Such a huge amount of "hot money", once the Fed releases a hawkish signal, once the collective withdrawal, the consequences are unimaginable.
In fact, smart money is already in action. This week, the 10-year Treasury yield has surged to an eight-week high of 4.12%. This suggests that investors are aggressively selling Treasuries for the Fed's hawkish pivot to reprice.
At the same time, the risk of sovereign credit default in the United States has also risen. Goldman Sachs data shows that United States' five-year sovereign CDS fees have risen to more than 37 basis points, the highest level in more than a year. This will undoubtedly further push up the cost of borrowing for United States.
With huge fiscal deficits and national debt accumulating, coupled with the risk of United States sovereign rating downgrades, even the ever-optimistic Wall Street bigwigs can't sit still. "Dr. Doom" Peter Schiff even bluntly said that the Fed is repeating the mistakes of the Bank of Japan and will eventually bring the United States economy into the abyss of no return.
As ordinary investors, how do we deal with this situation?
First, stay calm and rational. Don't blindly follow the trend and buy overvalued United States assets at will. After all, when the bubble starts to expand, it's not far from bursting.
Second, we must learn to allocate assets globally. In volatile market environments, emerging markets often offer more investment opportunities. Once the dollar embarks on a new depreciation cycle, these emerging economies will become more attractive.
Third, it is also necessary to do a good job of risk hedging. Some safe-haven assets, such as gold and treasury bonds, can be appropriately allocated to deal with possible crisis shocks.
Fourth, in the long run, it is still necessary to focus on the real economy and pay attention to high-growth high-quality enterprises. Only by taking root in the industry and deeply cultivating the main business can the enterprise go through the cycle and build a long-lasting foundation.
Looking at the latest trends of the Federal Reserve, it is not difficult to find that "smart money" is quietly arranged, and "financial giants" like Powell and Bostic are also secretly competing. The market is treacherous, and only by maintaining concentration and judging the situation can we be invincible. Let's wait and see who will have the last laugh and who will leave the show.
What do you think about this? Welcome to communicate in the comment area!