The Federal Reserve is entering a defensive wait-and-see state If the market at the end of 2024 and the beginning of 2025 is betting that the Federal Reserve will proactively lower interest rates to neutral levels, then this meeting officially declares the end of this expectation driven trading. Directly letting go of the market and letting it go on its own is your skill. If you go wrong, you bear the risk. The following is a deep breakdown of the macro logic of the US stock market: 1. Shift from liquidity premium to performance resilience Over the past year, the rise of the US stock market (especially the Nasdaq) has largely benefited from the upcoming valuation recovery due to interest rate cuts. Now Powell is kicking the ball back to the market: since the economy is stable, I won't give extra liquidity leverage. The US stock market is currently facing a tug of war with a basic upward trend and a downward valuation. Powell emphasized the steady expansion of economic activity, which provides confidence for corporate profitability. But against the backdrop of significantly reduced expectations of interest rate cuts, high interest rates are like the Damocles sword hanging over technology stocks and high multiple assets. 2. The amplification of volatility caused by data dependence Powell's shortening of the press conference time is essentially a refusal to provide forward guidance The Federal Reserve no longer sets a predetermined path, and every non farm payroll data and CPI will become new variables. Due to the lack of macroeconomic guidance anchors from the Federal Reserve, the pricing logic of the market will become chaotic. 3. In addition to interest rates, what is more important is the Federal Reserve's balance sheet (QT) Interest rates determine the price of water, and the balance sheet is the total amount of water. The prosperity of the US stock market in the past few years is largely due not to cheap water, but to abundant water. If the Federal Reserve decides to raise interest rates for a longer period of time, then it becomes crucial when the balance sheet tightening (QT) will stop. At present, the balance of reverse repurchase agreements (RRPs) may have dried up, which means that the buffer is gone. The next QT will be deducted directly from the bank's reserves. Even if the Federal Reserve does not raise interest rates, as long as reserves continue to shrink, the market's risk appetite will decrease, leading to a contraction in US stock valuations Powell remained silent on QT during the meeting, which was actually an implicit shift of focus. He tacitly agreed to let market liquidity continue to drain until something went wrong. 4. Shadow of 2026: Tariffs and Secondary Inflation Powell specifically mentioned that the inflation caused by tariffs will subside in mid-2026, which is actually a heavy soft warning: This means that the Federal Reserve has already considered the impact of tariffs in advance. In the first half of this year, the Federal Reserve will maintain great patience and even tolerate a slight rebound in inflation data, as they believe it is a policy induced pain. It is difficult for US bond yields (especially in the long end) to quickly decline, which continues to suppress interest rate sensitive industries such as real estate and automobiles.