It's rare for friends to remember the last drop. My concept of the last drop has always been an economic recession. In other words, if there is no economic recession, it doesn't count as the "last drop" in my cognitive framework. The reason I say this is that historically, when interest rates are high (especially above 5%), the probability of the economy eventually falling into recession exceeds 70% (some statistics even approach 80%).

Statistically, the Federal Reserve has maintained the federal funds target rate at 5% or higher in about 9 complete cycles (excluding brief touches), of which at least 7 ultimately led to economic recession.

• 1973: High interest rates + oil crisis led to recession
• 1980: High interest rates caused two consecutive recessions
• 1990: The Gulf War led to recession
• 2000: The bursting of the IT bubble led to recession
• 2007: The mortgage crisis turned into a financial crisis leading to recession

These instances mostly occurred under high interest rates. This time, the peak interest rate is 5.5%, which historically is considered a relatively high rate. Therefore, according to historical patterns, there is indeed a high probability of an economic recession.

Of course, this does not mean that a recession will definitely happen now, but it must be acknowledged that a recession is one of the current probabilities that cannot be ignored. Moreover, such recessions often occur simultaneously with interest rate cuts, not because rate cuts cause economic recession, but because economic recession forces the Federal Reserve to enter a rate-cutting phase.

More importantly, only a recession can promote the Federal Reserve's easing, especially the QE tool, which is almost always used after a recession. From a historical perspective, recession itself is also one of the most effective means of suppressing inflation. Therefore, for me, a recession is the last drop; only after going through this round of decline will the market truly welcome a liquidity turning point.

The above are my personal thoughts and may not necessarily be correct.

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