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View detailsThe Swiss National Bank announced the third rate cut this year, saying that it may cut interest rates further in the future.
On Thursday, September 26th, Beijing time, the Swiss National Bank announced the latest interest rate resolution, announcing that the benchmark interest rate would be lowered by 25 basis points to 1.00%, which was the third consecutive rate cut, in line with market expectations. Driven by the geopolitical crisis, the Swiss franc exchange rate has continued to rise since the middle of this year. The statement said that it will be prepared to intervene in the foreign exchange market if necessary. In the past quarter, inflation pressure in Switzerland has slowed down significantly, and economic growth has recovered moderately. At the same time, Switzerland's GDP grew steadily in the second quarter, and the overall capacity interest rate remained at a normal level, indicating a steady economic recovery. It is estimated that the average annual inflation rate will be 1.2% in 2024, 0.6% in 2025 and 0.7% in 2026. Risk warning and exemption clause
2024-09-26 -
View detailsThe Fed's "favorite" inflation indicator was released on Friday. Will it support a sharp interest rate cut this year?
The core PCE price index, the Fed's favorite inflation indicator, will be released on Friday night, and this data will provide further key clues for the Fed to cut interest rates. It is widely expected that the PCE price index in the United States will fall back to 2.3% in August, the lowest level since the beginning of 2021, but the core PCE price index will increase by 0.1% to 2.7% compared with July. Economists believe that the rise in core inflation stems from the unexpected rise in housing costs, but the current rent and housing prices tend to be stable, and inflation in major areas except housing has eased. Therefore, the inflation index in August may support the Fed to cut interest rates further. On the other hand, investors are quietly preparing for the return of inflation, thinking that the road to "fighting inflation" has a long way to go. The data shows that investors' average inflation expectation for the next five years is 2.04%, which is higher than 1.86% at the beginning of the month. The loose pace of the Fed's interest rate cut by 50 basis points a few days ago may rekindle the inflation risk in the second half of the year. According to the latest survey by Bloomberg: In August, the PCE price index of the United States is expected to increase by 2.3% year-on-year, or it will hit the lowest level since the beginning of 2021, down by 0.2 percentage points from the previous value of 2.5%, and the month-on-month increase is expected to drop from 0.2% in July to 0.1%. The core PCE price index is expected to increase by 2.7% year-on-year, 0.1 percentage point higher than the previous value of 2.6%, and the chain-on-chain increase is expected to remain unchanged at 0.2%. Housing cost "exaggerates" inflation? August data may support further interest rate cuts. The market expects the US PCE price index to fall back to 2.3% in August, hitting the lowest level since the beginning of 2021. Some economists even predict that the Fed will achieve its 2% inflation target in January or February next year. Gregory Daco, chief economist of Parthenon-Ernst & Young, said: We expect PCE to be around 2.5% by the end of the year, and then close to the Fed's 2% target in early 2025. On the other hand, however, the market expects core inflation to rise in August: the core PCE price index is expected to rise from 2.6% to 2.7% in August. In this regard, some economists explained that the most likely reason for the rising source of inflation was the unexpected sharp increase in housing costs last month. However, recent trends show that rents and house prices have stabilized, and inflation may slow down further in the coming months. Some senior Fed officials, including Federal Reserve Chairman Powell, believe that the housing index exaggerates the inflation rate in the United States. And housing is the largest component of the main inflation index of the US government. According to the analysis, inflation has eased in most areas except housing. The upcoming PCE inflation indicator data may show that inflation has cooled down and support the Fed to cut interest rates further. As long as rents continue to fall, Fed officials are prepared to ignore the expensive housing costs to better understand the potential inflation rate. Nationwide economists wrote in a report: Although there may be some bumps along the way, at present, inflation seems to be moving towards the Fed's 2% target. However, investors are quietly preparing for the return of inflation. The current market worries about the resurgence of inflation have not been eliminated. As of Tuesday, both inflation swaps and Treasury inflation-protected securities indicated that inflation may hover above the Fed's 2% target in the next few years. According to the latest data from the St. Louis Federal Reserve, the five-year break-even inflation rate in the United States (reflecting investors' expectations for the average inflation rate in the next five years) recently climbed to 2.04%, and earlier this month, this indicator hit a nearly four-year low of 1.86%. The inflation swap market has also shown a similar trend. According to Tradeweb data, as of Tuesday, the inflation rate of one-year swaps linked to the overall CPI was 2.028%, while that of five-year swaps was 2.333%, both of which were higher than the lows in September. The Federal Reserve lowered its policy interest rate target by 50 basis points last week, further relaxing monetary policy. Tim Murray, a capital market strategist at T. Rowe Price, said that inflation may reignite in the second half of this year: They prefer to gradually reduce inflation to avoid economic recession, but this road means that inflation risks still exist. Not only will inflation take longer to subside, but it may be rekindled with the arrival of the second half of the year. Even some senior Fed officials are worried that inflation has not been completely defeated. Bowman, the only Fed governor who voted against it last week, pointed out in a statement that such a dramatic first rate cut may unnecessarily restore inflationary pressure. Risk warning and exemption clause The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2024-09-25 -
View detailsIgnoring the Fed's interest rate cut, the Reserve Bank of Australia
On Tuesday, the Reserve Bank of Australia (the central bank) announced the latest interest rate resolution, announcing that the key interest rate level would be maintained at 4.35%, in line with market expectations. The monetary policy statement pointed out that although Australia's inflation has fallen sharply since its peak in 2022, it is still above the upper limit of the target range. The inflation target may be postponed, paying attention to the long-term downward trend of inflation. In terms of employment, Australia's labor market has maintained a good momentum, and the unemployment rate has stabilized at a historical low of 4.2%. Stephen Spratt, interest rate strategist at Societe Generale in Hong Kong, commented: "This seems to be a signal to the market, that is, don't read too much about tomorrow's August CPI data, although it is expected to fall back to the target range." Judging from the statement, the Reserve Bank of Australia has confidence in the fight against inflation, and it is expected that inflation indicators will remain an important reference for the monetary policy path in the future: "The policy needs to take enough restrictive measures until the Committee is convinced that inflation can move towards the target range in a sustainable way." The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2024-09-24 -
View detailsThe Fed's "non-recession interest rate cut", the traditional defense strategy will not work.
With the Federal Reserve opening its easing cycle for the first time in four years, the stock market's interest rate cut trading manual has changed? Generally speaking, when the Fed cuts interest rates to boost the economy, investors tend to choose defensive stocks and high dividend stocks to avoid growth stocks, including the technology industry, which are easily affected by the macro-economy. However, due to the resilience of the US economy at the time of this interest rate cut, the interest rate cut has brought about a rise in technology stocks, a record high in the stock market, sustained economic growth and a better profit prospect for enterprises. Judging from the flow of funds after the interest rate cut, investors are shifting from defensive stocks to cyclical stocks. According to the data of Goldman Sachs Group's bulk brokerage business, last week, hedge funds bought TMT shares (technology, media, communications) for the third consecutive week, and their net positions reached the largest in four months. At the same time, defense stocks showed the largest net selling in more than two months, and the outflow of funds from public utilities stocks reached the largest scale in more than five years. Frank Monkam, senior portfolio manager of Antimo, said: "The Fed chose to cut interest rates sharply in a fairly relaxed financial environment, which is a clear signal to the market that it should take an offensive position." "Traditional defensive stocks, such as utilities or consumer stocks, may not be very attractive." Why is this interest rate cut different from history? Why is this rate cut a "non-recession rate cut"? According to the data of Bank of America, eight of the nine easing cycles since 1970 occurred when corporate profits slowed down. However, Savita Subramanian, head of the bank's stock and quantitative strategy, wrote in a report to clients: The current situation is that profits are expanding, which is beneficial to cyclical stocks and large-cap stocks. This means that the Fed didn't cut interest rates out of recession, Subramanian said: "The Fed doesn't have a script—every easing cycle is different." However, judging from the historical interest rate cut cycle, every time the Fed cuts interest rates, it will often drive the overall market to rise. According to Bank of America data, in the absence of recession, since 1970, S&P has risen by an average of 21% in the year after the Federal Reserve cut interest rates for the first time. Investment style switching: banking, technology and real estate are sought after. So, what kind of investment style did the Fed's "non-recession interest rate cut" bring? As Subramanian said, investors are turning to cyclical stocks, large-cap stocks and other growing industries. Thanks to the stimulating effect of the relaxed environment on consumption, industries such as real estate and automobiles are also expected to achieve growth. Phil Blancato, CEO of Ladenburg Thalmann Asset Management, said: "You will see excited consumers-the decline in mortgage interest rates will stimulate consumption, both in the housing market and the automobile market." Utility stocks in traditional trading strategies also continue to be hot, because the AI investment boom has increased the attractiveness of the industry. In fact, utility stocks have risen by 26% this year, making them the second best performing sector in S&P.. Risk warning and exemption clause The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2024-09-23 -
View detailsIs the surge after the interest rate cut just a flash in the pan? GIC Chief Investment Officer in Singapore warns that inflation may come back soon.
However, Jeffrey Jaensubhakij, chief investment officer of GIC, Singapore's sovereign wealth fund, warned that the market boom after the Federal Reserve cut interest rates sharply on Wednesday may be just a flash in the pan, given the rising inflation risk. At the Asia Summit of milken Research Institute in 2024, he said: Jaensubhakij pointed out that as the US election approaches, politicians may launch unnecessary stimulus measures to win votes. He also mentioned that many companies supported by GIC need to borrow money and hope to see further interest rate cuts. To some extent, the signal from the bond market is that interest rates need to fall as sharply as they are about to enter a recession. On the other hand, the stock market thinks that the economy will accelerate again and corporate profits will pick up. Only one of the two is right. As for the surge of US stocks on Thursday, some analysts believe that the data of US initial jobless claims released on the same day unexpectedly fell to a four-month low, which enhanced investors' confidence in the Fed's "soft landing" of the economy. Tom Lee, one of the most optimistic bulls on Wall Street and the research director of Fundstrat Global Advisors, also believes that the Fed's interest rate cut cycle has laid the foundation for the strength of US stocks in the next one to three months. However, with the approach of the US presidential election in November, it is not entirely believed that US stocks will continue to rise, and there is still great uncertainty about the trend of US stocks. The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2024-09-20 -
View detailsThe Fed has finally started the interest rate cut cycle, and the global interest rate cut tide is coming, and Southeast Asia is the biggest winner?
The central bank's interest rate cut will usually drive the local currency to weaken. For the central banks of emerging market countries, starting to cut interest rates before the Fed cuts interest rates may lead to the devaluation of their own currencies, the decline in investment attractiveness, the rise in import prices and thus the inflation. At present, the central banks in Southeast Asia are on the verge of a rate cut cycle. Wall Street has previously mentioned that the local market prospects are generally optimistic because central banks in Southeast Asia have more room to relax monetary policy. The real interest rate in Southeast Asian countries is higher than a year ago, and there is room for further interest rate reduction, which is good news for the local bond market. In addition, the valuation advantages and cheap labor costs in Southeast Asia also provide positive prospects for the local market. The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2024-09-19 -
View detailsNew Debt King: Support to cut interest rates by 50 basis points, the Fed has been
In September, the interest rate decision is about to come to the table, and the market is full of voices. Traders' attitude towards the first rate cut of 25 basis points or 50 basis points continues to be divided. Jeffrey Gundlach, the founder of DoubleLine Capital and the new creditor, also joined the debate on the scale of interest rate cuts, and bet that the Fed will start its interest rate cut cycle by cutting 50 basis points at the interest rate meeting on Wednesday. The market speculated that the Fed was preparing to cut the benchmark interest rate quickly to prevent economic stagnation. This expectation has promoted the trend of the bond market, and the yield of two-year US Treasury bonds has fallen below 3.6%, which is about 1.75 percentage points lower than the target interest rate of the Federal Reserve. Up to now, the yield of US two-year treasury bonds is reported at 3.596%. Gundlach thinks the Fed should narrow this gap. He predicted that the Fed is likely to cut interest rates by 50 basis points this time, with a total reduction of 125 basis points by the end of the year. On Tuesday, he told the Future Proof conference in California that the US economy has fallen into recession and the Federal Reserve has maintained a tightening policy for too long: "I think they will cut interest rates by 50 basis points. The Fed is' far behind the curve' and they should act quickly." Traders, on the other hand, believe that the possibility of cutting interest rates by 50 basis points is about 55%. According to data released by the United States on Tuesday, retail sales unexpectedly rose in August, while employment data in August also showed a weak trend, recruitment slowed down significantly, and the unemployment rate rose to the highest level of 4.3% in the past three years. Gundlach said that he gave the Fed an "F" rating, adding that "they should have cut interest rates earlier ... I have seen many layoffs and the United States has fallen into recession." Risk warning and exemption clause The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2024-09-18 -
View detailsIn a word, the stock price stimulant, Trump Media Company suddenly violently pulled 30%
Perhaps Trump's shelling of the Fed can't hinder the Fed's actions, but his mouth gun is still very lethal in some cases, at least for the media companies he has mastered. On Friday, September 13th, EST, the stock price of Trump Media & Technology Group(DJT), a media company mainly held by Trump, suddenly surged in intraday trading. In less than half an hour, the intraday increase quickly expanded from slightly over 1% to nearly 30%, then quickly fell back, retreated more than half of the increase within 20 minutes, and finally closed up by about 11.8%. More than one media pointed out that the soaring stock price of Trump Media on Friday was attributed to Trump's own statement. When attending an election campaign in California that day, he said that when the lock-up period expires after the stock goes public next Friday, September 20, he "has absolutely no intention of selling" his shares in Trump Media. Trump made it clear: "No, I won't sell it. People think that the reason for the stock price decline is that many people think that I will sell. I can understand this, but I have absolutely no intention of selling it. " Trump Media currently operates a social media network called Truth Social, which is X's rival. On March 26th this year, the company listed on NASDAQ by merging the special purpose acquisition company (SPAC) named Digital World Acquisition Corp (DWAC). Trump holds 114.75 million shares of Trump Media, accounting for 57%. According to the relevant regulations of SPAC listing, the shares of listed companies have a lock-up period of about six months. Some commentators said that Trump Media experienced a bleak decline for seven weeks, and its market value evaporated by billions of dollars, for fear that Trump or other major shareholders might sell a lot of stocks after the lock-up period, thus generating greater selling pressure. Trump's speech on Friday directly responded to this investor's concern. He said: "Many people think that I will sell my stock. I mean, they are worth billions of dollars. But I don't want to sell my stock. I won't sell my stock. I don't need money. " As of the opening of this Friday, the market value of Trump Media shares held by Trump is about 1.85 billion US dollars. As long as he doesn't sell, for every $1 increase in the stock price, his shareholding will increase by about $115 million in name. However, the Trump media has fallen sharply since its listing. Although the stock price rose sharply this Friday, as of Friday's close, it still fell by more than 77% from the intraday high of $79.38 on March 26, and fell by more than 50% from the stock price high set after Trump's assassination on July 15. Some media estimate that if Trump Media's share price falls below $13, Trump's book income since the merger of the company and DWAC will be wiped out. If the stock price falls to $12.88, the value of Trump's stock will be lower than the upper limit of the company's private equity valuation range of $1.478 billion as of December 15 last year. Another media pointed out that Trump Media has always been a Meme stock sought after by retail investors. Although the company's basic business income is meager and unprofitable, its valuation has soared to an alarming level. For some people, this stock is to some extent a representative of Trump's chances of being elected president. The media said that with Trump's return to the social media platform X, formerly known as Twitter, the correlation between this election probability and stock price has collapsed in recent weeks. However, Wall Street has noticed that after the first TV debate between Trump and Harris ended on Tuesday night, Trump's trading enthusiasm further declined, and Trump Media fell by about 10.5% on Wednesday, the lowest closing record since its listing in March. Risk warning and exemption clause The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2024-09-14 -
View detailsWhy is the US debt so strong? There is too much money waiting for
Investors are actively putting their cash into the global bond market, especially US Treasury bonds. This week's auction of US Treasury bonds shows that investors have strong demand for US Treasury bonds. The assets of American money market funds continued to surge, and recently reached a record high in the week ending Wednesday. El-Erian, president of Queen's College, Cambridge University, believes that the recent price trend of US Treasury bonds is partly due to "the rapid development of OTC funds". "Because of the large amount of cash held off-site, people are worried that if they don't deposit their money in an account with a fixed interest rate now, they will lose interest income in the future. Every time interest rates rise, people will flock. " With the interest rate cut imminent, investors are still willing to hold cash assets. On Thursday, US Treasury bonds fell across the board. Due to the release of the inflation report the day before yesterday, the treasury bond market was turbulent, which quickly attracted investors to buy on dips, leading to a rapid rebound in the bond market. Although it is widely expected that the Federal Reserve will cut interest rates at next week's interest rate decision, investors are still willing to hold cash or buy assets similar to cash. Mark Cabana and Katie Craig, bank of America strategists, said: "investors may not turn to risky assets quickly because of interest rate cuts." El-Erian said that a large number of investors bought 10-year US Treasury bonds indirectly in the auction of US$ 39 billion on Wednesday. According to the latest data from the Investment Company Institute, as of the week of September 11th, the total assets held by American money market funds reached a record $6.32 trillion. In the past six weeks, this figure has increased by about $188 billion. Outside the United States, investors still have a high demand for long-term treasury bonds. On Tuesday, Italy set a new record by selling 30-year new bonds for 8 billion euros; At the beginning of this month, in Britain, the sales of British government bonds reached 8 billion pounds in 2040, which was the first sale since the New Labour government came to power, setting a record for the highest demand. Risk warning and exemption clause The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2024-09-13 -
View detailsInflation falls, and the European Central Bank may cut interest rates before the Federal Reserve.
With inflation in Europe falling to the lowest level in three years, the market expects that the European Central Bank will beat the Federal Reserve to cut interest rates first. At present, traders generally expect that the Federal Reserve will start the interest rate cut cycle at its meeting on September 17-18, and the European Central Bank will cut interest rates by 25 basis points again on Thursday. Holger Schmieding, chief economist of Berenberg Bank, said that "the interest rate cut this Thursday should not cause much controversy". Joachim Nagel, governor of the German central bank, who is usually regarded as one of the hawks of the ECB Council, also said: "I will support a rate cut unless there is evidence against it." Previously, the European Central Bank's benchmark interest rate cut sharply in June this year after raising interest rates for many years. In July, the European Central Bank voted unanimously to keep the interest rate unchanged, but at the same time said that the possibility of cutting interest rates in September was "very great", and its benchmark interest rate is currently 3.75%. Since then, the inflation rate in the euro zone has further declined. In August, the overall inflation rate in the euro zone fell to a three-year low of 2.2%, and the core inflation rate remained at a high of 2.8% due to the rise in service prices. On Thursday, the European Central Bank will also release a new economic forecast, analyzing that it is unlikely that inflation or growth data will be significantly adjusted. However, some economists still believe that the economic growth prospects are grim, and Anatoli Annenkov of Societe Generale points out: "In the recent data, the most worrying thing is that confidence has weakened and the service industry seems to be in an unstable state. Due to the lack of motivation in domestic demand in the second quarter, the weakness of manufacturing may spread and begin to have a greater impact on the originally strong labor market. " At present, the consensus within the European Central Bank tends to be optimistic, and it is believed that the European Central Bank is moving towards the goal of returning the inflation rate to 2%. At the same time, Philip Lane, the chief economist of the European Central Bank, also warned that if interest rates remain high for a long time, inflation may be "long-term" below the target. Risk warning and exemption clause The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2024-09-12