Some friends asked me why I am so pessimistic about this trend, meaning why I think there might be risks in the risk market after the US election. I can explain here that this issue has already been discussed in the "last fall," with the focus on the Fed's interest rate cut cycle.
Now, looking at it, the market is betting that the Fed will cut interest rates twice in 2024. What does this concept represent? This means:
The Fed is not eager to enter into defensive interest rate cuts, and the direct consequence is that the probability of a black swan event in the US economy under high interest rates is increasing. If inflation does not decrease, the Fed may maintain high interest rates for a longer period.
The Fed enters into defensive interest rate cuts, but defensive interest rate cuts often result in a relatively slow decline in interest rates, needing to be coordinated with the trend of inflation. Unless there is a significant decrease in inflation, the Fed is unlikely to follow with a substantial interest rate cut. The Fed's liquidity injection often occurs only when the market is heavily impacted by low or zero interest rates.
In plain language, if there is an economic recession or crisis, the Fed will choose to inject liquidity to help the market recover quickly. However, if the economy is doing fine or is at a standstill, the Fed's liquidity injection loses its purpose. Without injecting liquidity, market liquidity will only slowly increase and recover, a process that will likely not occur until after 2026.
- The Fed starts to cut interest rates as a last resort, which means that a black swan event occurred in 2024, likely causing a significant blow to the economy. At this time, the Fed is very likely to increase the intensity of interest rate cuts to balance the economic damage. However, this process cannot be achieved in just three to five months. It would take at least half a year to go from a 5.5% interest rate back to 0.25% or lower. Historically, there has never been a situation where a 5% interest rate reduction occurred within half a year. If it does happen, it would mean that the economic damage is unprecedented, and the currency market would be difficult to survive independently.
So, taking a comprehensive view, if we follow the trend of the economic cycle, the US election may be the peak of this cycle (2024 halving cycle). The comprehensive reason is that the market sentiment is still good, and there are multiple positives at the end of the year (FASB and the US election). If the Fed appropriately relaxes a bit, the market sentiment will be even better.
This post is sponsored by @ApeXProtocolCN | Dex With ApeX
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
