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View detailsGoldman Sachs Annual Forecast: Ten Key Issues of Trump 2.0
On December 29th, Jan Hatzius, the chief economist of Goldman Sachs, and his team released the report "US Economic Analyst: 10 Questions for 2025", outlining the ten key topics that will affect the US stock market next year, and providing analysis and answers to related questions. 1. Will GDP growth exceed market expectations? This growth is mainly due to strong consumer spending, steady real income growth and healthy business investment. In addition, Hatzius and others said that the Trump administration's policy changes will put pressure on growth in 2025, but it will bring a boost in 2026, which will roughly offset the growth pressure. The drag of immigration reduction and tariff increase on the economy may appear earlier, and the boosting effect of tax reduction needs legislative support, so it takes longer. Yes. Hatzius and others predict that the growth of consumer spending in the United States will reach 2.3% in 2025, which is consistent with 2023 and 2024. In addition, Hatzius predicts that the wealth effect will provide an additional boost to residents' spending-the family financial situation remains strong and further improved due to the steady rise of stock prices. No. Hatzius and others pointed out that although the labor market in the United States was slightly weaker this year than in previous years, it remained strong by historical and international standards, and many people were too worried about the Sam rule triggered in July-after all, the number of job vacancies in the United States was still high, and there was never any sign of a layoff spiral (that is, unemployment led to reduced consumption, which further led to unemployment). In short, Goldman Sachs believes that although the unemployment rate needs attention, they still expect the unemployment rate in the United States to drop to 4% in 2025 for three reasons: The main reason for this year's weak labor market is that it is difficult to fully absorb the large number of new immigrants who flood into the labor market every month in the short term, and this trend has obviously declined and will be further slowed down in 2025; 4. Will the inflation of core personal consumption expenditure (PCE) fall below 2.4% year-on-year after deducting the tariff effect? Hatzius added that the cooling of wage pressure, the easing of lagging inflation and the stability of financial services are the main driving factors for the cooling of inflation. Yes. Goldman Sachs predicts that the Fed will cut interest rates in March, June and September 2025, and cut interest rates three times every quarter or every other meeting. Goldman Sachs believes that inflation is falling, and it is expected that the annual rate of core PCE will drop by nearly 0.3 percentage points by the Fed meeting in March next year. 6. Will the Fed's forecast of neutral interest rate be raised from 3% to at least 3.25%? Hatzius said that this forecast may be further raised in 2025, because the latest model update of Goldman Sachs shows that the neutral interest rate ranges from 2.8% to 4.6%, with a nominal average of 3.8%, while the market pricing is higher. No. During his first term, Trump repeatedly expressed his hope to fire Powell and find someone who can lower interest rates to replace him, and FOMC has said that it is not expected to cut interest rates at the meeting in January next year-if so, it will undoubtedly aggravate the tension between the White House and the Federal Reserve. Trump's first term has proved that the president can't dismiss the chairman of the Federal Reserve at will, because the law only allows the chairman to be dismissed for "just reasons", and the court is unlikely to find that "no interest rate cut" is a just reason to dismiss the chairman; 8. Will net migration become negative? Moreover, these 750,000 are mainly legal immigrants, and the illegal immigrants who are deported will roughly offset the asylum seekers and those who illegally enter the United States. No. Goldman Sachs believes that the imposition of 10%-20% universal tariffs on all imported goods in the United States will bring serious risks, and the White House will tend to avoid potential economic costs and political risks related to universal tariffs. 10. Will Congress substantially reduce the primary deficit? Hatzius and others also mentioned that the Republican leadership in the House of Representatives recently promised to find ways to cut 2.5 trillion U.S. dollars in mandatory spending items, and the Trump team also said that the newly established Government Efficiency Department can cut at least 2 trillion U.S. dollars from the federal budget, but Goldman Sachs believes that these proposals are unlikely to translate into substantial reductions in spending and deficits next year or even in 2026 for two reasons: These cuts need the support of the Democratic Party anyway, because the annual spending bill is separated from the fiscal policy reform that the Republican Party plans to "reconcile" through partisan positions. Although Republicans in Congress may cut other welfare programs, such as Medicaid, these measures may take effect gradually in a few years, and Goldman Sachs expects that these savings will be used to fund new tax breaks, not to reduce the deficit. 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.
2024-12-31 -
View detailsThe "true fragrance law" is overwhelming, and Wall Street "wants to refuse and welcome" to embrace Bitcoin.
This year, the rise of Bitcoin is amazing, and the trading boom related to Bitcoin has swept through Wall Street, and the big investment banks that once sneered at it have made a 180-degree turn. At the weekend, Craig Coben, the former head of equity investment of Bank of America, pointed out in a column in the Financial Times that the attitude of wall street investment banks towards cryptocurrencies has changed significantly, and large banks that once stayed away from cryptocurrencies are now participating in it. This change reflects the profound change in the attitude of the financial community towards cryptocurrencies. Coben listed the related transactions this year. With the expansion of encrypted transactions, the list of banks participating in underwriting is increasing: Barclays Bank and Citigroup led the issuance of convertible bonds for bitcoin investment company MicroStrategy several times this year. Goldman Sachs raised funds for Applied Digital, a data center operator serving bitcoin miners. JPMorgan Chase underwritten a large number of convertible bonds for bitcoin mining and infrastructure groups Core Scientific, Mara and Iren. ...... From shunning to rushing, Wall Street lost its initial insistence step by step, and Coben felt that the wind had changed: JPMorgan Chase CEO Jamie Dimon once called Bitcoin "fraud" and "Ponzi scheme". Regulatory concerns deepened this indifference, and cryptocurrency trading became the business of smaller investment banks. In January 2024, the US Securities and Exchange Commission (SEC) approved the Bitcoin Exchange Trading Fund (ETF), marking a watershed. In addition, Trump may be re-elected, which indicates that the SEC will adopt a more friendly cryptocurrency policy, in sharp contrast to the skepticism of the current chairman Gary Gensler. What is more important is income. Compared with the potential huge income, the concern about reputation is not so important. Coben said that in the bitcoin market, transaction costs are now considerable: According to IFR data, more than $13 billion of cryptocurrency-related convertible bonds have been issued in 2024, most of which are concentrated in the latest quarter, which means at least $200 million in underwriting fee income, and MicroStrategy's $21 billion stock issuance pays 2% to the underwriting bank. This potential income makes maintaining reputation a luxury. However, when banks decide whether to devote themselves to cryptocurrency business, they are faced with a core problem: can they ensure safety through strict legal control and full disclosure of risk factors in the prospectus? Or, is it too risky to be associated with this industry that many people regard as highly speculative? Coben analysis believes that once a few banks break the rules, other banks will follow quickly. After all, no banker is willing to explain to the boss why they have not achieved their expected goals or slipped in the rankings. This depends on the risk tolerance and strategic prospect of each bank, and different types of cryptocurrency-related companies may have different risk characteristics. For example, a mature exchange like Coinbase may have a different risk profile than an investment vehicle like Bitcoin miners or MicroStrategy. Once several banks break the rules, others will be under pressure to follow suit. Collective action is safer, and if problems arise, no single bank will become the target of public criticism. Competitive instinct also plays an important role. After all, no banker is willing to explain to his boss why he didn't achieve his expected goal or fell down in the rankings. 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.
2024-12-30 -
View details"New Fed News Agency": The Fed is trying to assess Trump's influence
As the new year approaches, Powell is caught in a dilemma, that is, how to deal with the inflationary pressure that his policies may bring without openly resisting Trump. On the 27th local time, Nick Timiraos, known as the "New Fed News Agency", published an article saying that the Fed is trying to re-evaluate the impact of the new Trump administration on the US economy and inflation. He tried to avoid a conflict with Donald Trump, although some of his colleagues expressed concern that the president-elect's policies might re-ignite inflationary pressure. Trump came to power soon, and the Fed raised inflation expectations. The latest economic forecast of the Federal Reserve shows that officials expect inflationary pressure next year to be more stubborn than previously expected. Most Fed officials expect to cut interest rates only twice next year and twice again in 2026, which is less than at least four interest rate cuts expected in September next year. Now, they expect the core inflation rate (excluding food and energy) to drop to 2.5% next year, higher than the previous forecast of 2.2%. In addition, 15 of the 19 officials believe that inflation may be higher than expected, a significant increase from 3 in September. Powell has been careful not to directly link the Fed's policy with Trump's proposal. At the press conference on November 7, just a few days after Trump won the election, he made it clear that the Fed would not make interest rate policy based on speculation or speculation about the new government policy. However, the Fed often emphasizes that its interest rate policy needs to be "forward-looking", which means that it needs to consider the future price pressure and employment situation forecast. This tendency to balance has been particularly evident in the past two months. Trump threatened to raise or impose new tariffs on trading partners and tighten immigration rules, which may push up prices and wages in the short term. However, Trump's advisers said that measures to deregulate and increase energy production may offset the impact of rising commodity prices and keep inflation down. Scott Bessent, the nominee of the US Treasury Secretary, played down the impact of Trump's proposed tariffs on inflation, arguing that tariffs would not lead companies to continuously raise prices. He once said in a radio program hosted by former Trump adviser Larry Kudlow: Tariffs will not lead to inflation, because if the price of one thing goes up, unless you give people more money, they will spend less on another thing, so there will be no inflation. This time, will Powell compromise? Powell said at a news conference last week that some Fed officials considered potential policy changes in their latest forecasts, while others did not. Powell denied that the November general election was the main reason for officials' more pessimistic inflation outlook, but pointed out that the inflation data had been firmer recently. Timiraos wrote that Powell privately urged his colleagues to be cautious in their public statements and not to directly link possible White House policy changes with the Fed's response, lest Republicans think that the Fed is trying to offset policies they don't like. This is in line with his long-term efforts to maintain the Fed culture, that is, to attach importance to non-political and calm analysis. Officials may find themselves politically concerned during the election campaign or when the new government carries out transformative policy reforms. There is still great uncertainty about the impact of the policy reforms that the new government may adopt. In 2018, when Trump first promoted the escalation of trade conflicts, the Federal Reserve cut interest rates under the pressure of the President. But Timiraos believes that this time the situation may be different, because the basic conditions have changed. At that time, the inflation rate was low, but now the United States has just experienced several years of high inflation. Michael Feroli, chief American economist in JPMorgan Chase, said: "In this environment, you don't start with inflation below the target for six years, but with inflation above the target for several years." In 2018, the Federal Reserve simulated the impact of tariff increase and concluded that as long as two conditions are met, the central bank can avoid cutting interest rates in the case of rising prices: households and enterprises expect inflation to remain low, and price increases are quickly transmitted to the economy. At the press conference on December 18th, when asked how to view the impact of tariff increase in the current environment, Powell quoted the briefing from the podium. Powell said: The Committee is currently discussing the path and re-understanding how tariffs affect inflation and the economy. When we finally see the actual policy, it will enable us to evaluate what may be the appropriate policy response more carefully and thoughtfully. 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.
2024-12-27 -
View detailsNearly 30 billion yuan a year: NVIDIA became the favorite of retail investors in 2024.
For the future trend of Tesla, analysts have great differences. Deutsche Bank predicted that Tesla's delivery in the fourth quarter was lower than expected, while Tesla's "die-hard powder" Wedbush was determined to see more. Recently, Wedbush analyst Daniel Ives raised Tesla's target share price from $400 to $515, and reiterated the rating of "outperforming the market". Ives told customers that Tesla's market value may exceed $2 trillion by the end of 2025. Ives said that the policy changes during Trump's second term will bring about a complete change in the rules of the game, because Tesla's autonomous driving and artificial intelligence business is expected to usher in explosive growth in a more friendly operating environment: "We raised Tesla's target share price from $400 to $515, because we believe that the Trump administration will become a' game changer' in Tesla and Musk's autonomous driving and artificial intelligence in the next four years. Our bull market expectation is that Tesla's share price will reach $650 in 2025." However, Deutsche Bank analysts Edison Yu and Winnie Dong said that the fourth quarter was "Tesla's biggest delivery quarter", but "so far, we think the delivery volume is slightly lower than" the 515,000 vehicles needed to achieve the annual growth target "-whether Tesla can achieve this goal in the fourth quarter and achieve full-year growth is still in doubt. The report wrote: "Tesla's delivery volume may be slightly lower than expected. Tesla needs to deliver at least 515,000 vehicles in the fourth quarter to achieve a slight increase in the annual delivery volume. According to the data so far, the actual delivery volume is close to 500,000 vehicles, while DBe/Street's expectation is 510,000-511,000 vehicles." Yu and Dong added: "Tesla's main delivery volume in the fourth quarter comes from China, and it is expected to be close to 210,000 vehicles, thanks to zero interest rate financing concessions and cash discount of Model Y.. There should be about 150,000 vehicles in North America and 84,000 vehicles in Europe. In October and November, the retail sales in China were 40,500 vehicles and 73,500 vehicles respectively, and the monthly sales as of December 15th exceeded 40,000 vehicles. According to the model, our tracking data shows that there are 153,000 Model 3, 322,000 Model Y, 11,000 Model S+X and about 14,000 Cybertruck. " In the previous third quarter, Tesla reported 462,890 vehicles delivered and 469,796 vehicles produced, which was slightly lower than the expectation of FactSet StreetAccount. According to the analysis, looking forward to the new year, the price war between Tesla and start-ups and traditional brands is expected to intensify, because President Trump plans to cancel the $7,500 tax concession for electric vehicles. Of course, Musk praised Trump's decision because it might bankrupt Tesla's competitors. 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.
2024-12-26 -
View detailsPowell's
The annual Christmas is coming, and there is "bad news" from the US debt market, and the yield of long-term debt has reached a seven-month high, which is all due to Powell's "Christmas gift"-the hawkish interest rate cut. Overnight, the yield of US 10-year benchmark government bonds broke through 4.6% in intraday trading, the highest since May, rising by about 20 basis points after the Federal Reserve cut interest rates last week, and then fell slightly in late trading. The yield of 30-year US bonds also hit the highest level since late April and then fell. The yield of two-year US bonds was basically flat in the range of 4.33% to 4.363%. On Wednesday, the US stock market and the US debt market will be closed for the Christmas holiday. The trend that doesn't match the festive atmosphere is attributed to Powell's "Christmas gift"-the hawks cut interest rates. Last week, the Federal Reserve lowered its interest rate cut forecast, suggesting that it will only cut interest rates twice in 2025, which is lower than the four interest rate cuts implied in September. The futures market now predicts that the federal funds rate will reach about 4% by the end of next year, which means cutting interest rates once or twice. Many financial institutions have given different interpretations of the Fed's policy stance. Steve Englander, an analyst at Standard Chartered Bank, said: We and the market are all surprised by the tough tone in the changes of the economic forecast of the Federal Open Market Committee, which is obviously a hedging event ... Federal Reserve Chairman Powell's main explanation for this shift is the increase in core inflation data in the past two months, although he pointed out that some forecasts have already included consideration of the expected impact of the incoming Trump administration's policies. Increasing the core PCE inflation rate from 2.2% to 2.5% in 2025 is particularly striking-only three participants think that the core inflation rate will be lower than 2.4% or lower, so no matter how rounded, the forecast in 2025 can not reach the target. Steven Blitz, an analyst at TS Lombard, is celebrating the victory. He thinks: The market is uneasy because the Fed didn't do what they expected, but it did what we always expected-to reduce the interest rate of funds to 4.25% of Taylor's rule between September and the end of the year, and the interest rate will remain at this level until the economy changes substantially. I wrote this again in July and September last year. Once the inflation rate falls below the capital interest rate, employment begins to slow down. Considering that inflation is the final lagging indicator, FOMC returns to model-based policy decisions, and the guidance on inflation or employment is a smoke bomb. Barclays believes that the chairman of the Federal Reserve did not seem particularly worried about the overall economic strength at the press conference: Powell did not focus on the deterioration of economic or labor market conditions, which shows that FOMC members are not as worried about downside risks as they were in September. 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.
2024-12-25 -
View detailsIn 2025, when the voting committee of the Federal Reserve rotates, the opposition between eagles and pigeons will be more distinct, and internal differences are expected to intensify.
As 2025 approaches, the voting members of the Federal Open Market Committee (FOMC) of the Federal Reserve will change, and the composition of the new FOMC is expected to have a significant impact on monetary policy decisions. This change takes place at a critical moment when inflation concerns in the United States are heating up again. At the same time, a series of potential policy changes by newly elected President Trump also add complexity to the Fed's future decision-making. At last week's December meeting, the Federal Reserve cut its benchmark interest rate by 25 basis points, and hinted that it might only cut interest rates twice in 2025. Federal Reserve Chairman Powell stressed that the pace of interest rate cuts in the future will be slower and depends on whether inflation continues to fall. Changes in the voting Committee in 2025 The Federal Reserve FOMC consists of the following members: seven members of the Federal Reserve Board of Directors, including Federal Reserve Chairman Powell; Chairman of the Federal Reserve Bank of new york with a permanent voting seat; Four regional Fed presidents, which are rotated annually by the presidents of 11 regional Fed presidents. Although non-voting members will also participate in the discussion at the meeting, voting members have a more direct influence on the policy results. In 2025, Boston Fed President Susan Collins, St. Louis Fed President Alberto Musalem, Kansas City Fed President Jeff Schmid and Chicago Fed President Austan Goolsbee will become new voting members. In 2025, the outgoing FOMC voting members include: Cleveland Fed President Beth Hammack, San Francisco Fed President Mary Daly, Richmond Fed President Tom Barkin and Atlanta Fed President Raphael Bostic. Among them, Hammack voted against it at the meeting in December, and she did not support interest rate cuts because of concerns about inflation. The other three officials are generally considered to be relatively moderate and middle. The core view of the new voting Committee The following is the latest policy stance of the new FOMC voting members of the Federal Reserve in 2025. Alberto Musalem, president of the St. Louis fed. He took office in April this year, and 2025 will be the first time for Musalem to participate in the FOMC voting. Musalem advocates patience in cutting interest rates: At the beginning of December, he pointed out that the inflation data released since September showed that the risk that the inflation cooling process might stagnate or even be reversed was increasing. "It may be time to consider slowing down the rate cut or suspending the rate cut to carefully assess the current economic environment, upcoming information and changing prospects." Jeff Schmid, President of Kansas City Federal Reserve. He took office in August 2023, and 2025 will be the first time Schmid participated in the FOMC voting. Schmid emphasized the uncertainty of the final level of interest rate, and advocated gradually reducing interest rate to avoid market fluctuation: Although I support reducing the restrictions of policies, I prefer to avoid excessive adjustment, especially considering the uncertainty of the final direction of policies and I hope to avoid aggravating financial market volatility. Susan Collins, President of Boston Fed. She took office in July 2022 and served as a FOMC voting member in 2022. Collins believes that further policy easing is needed, but at the same time emphasizes the need to carefully evaluate economic data and risk balance: Collins said in mid-November that although the end of the policy is still uncertain, some additional policy easing is needed. She reiterated that interest rates were not on the preset path, and described the US economy as generally in good condition. "The policy adjustments made so far have enabled FOMC to move forward cautiously and take the time to comprehensively evaluate the impact of existing data on the prospects and the related risk balance." Austan Goolsbee, President of Chicago Fed. He took office in January 2023 and served as a voting member of FOMC in 2023. Goolsbee is a very dovish official. He thinks that the Fed policy is still above the neutral level at present, and predicts that the borrowing cost will drop sharply in the next 12-18 months. Last Friday, he revealed that he slightly raised his interest rate forecast for next year, but still expected the borrowing cost to fall: I think we are on the way to the 2% inflation target, and there is still a lot of room for interest rates to fall in the next 12-18 months. Analysis and comment The core question facing the FOMC of the Federal Reserve is: How quickly should interest rates be lowered when inflation is still above the target level of 2%? This issue is further complicated by the possible fiscal policy of the new Trump administration. Some economists predict that Trump's policies of raising tariffs, reducing taxes and expelling immigrants on a large scale may push up inflation and put pressure on the labor market. The voting committee of the Federal Reserve has voted against the FOMC twice this year, reflecting the differences within the Federal Reserve. For example, in September 2024, Federal Reserve Governor Bowman opposed a 50 basis point rate cut, arguing that the rate cut was too large and advocated a smaller rate cut. In December 2024, Cleveland Fed President Hammack opposed the interest rate cut and advocated maintaining the existing interest rate. According to Bloomberg's analysis, there may be more differences within the Federal Reserve FOMC in 2025. Next year's voting members will be more dispersed in their policy positions, showing that the views at both ends of hawks and doves are more distinct and antagonistic, and the number of members in the middle position will decrease. This difference may increase the uncertainty of decision-making. In this regard, Don Kohn, former vice chairman of the Federal Reserve, believes that it is not necessarily a bad thing if the thorny policy problems faced by FOMC lead to more objections next year. "I don't think there is anything wrong with occasional objections. I think the public should rest assured that different views are being heard within the FOMC Committee. " 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.
2024-12-24 -
View detailsOver $100 billion! Hong Kong Stock Connect recorded a record inflow this year.
This year, the "Hong Kong stock fever" struck. On December 23rd, Bloomberg reported that mainland investors in China were enthusiastic about Hong Kong stocks in 2024. As of December 20th, mainland investors bought 778 billion Hong Kong dollars (about 100 billion US dollars) of Hong Kong stocks through Shanghai-Shenzhen-Hong Kong Stock Connect this year, setting an annual record since the opening of Shanghai-Shenzhen-Hong Kong Stock Connect in 2016. In the fourth quarter, the trading share of mainland investors in the Hong Kong market reached a record 45%, and the stocks of companies such as Alibaba, Bank of China and China Mobile were the most popular targets. The analysis believes that this "Hong Kong stock fever" is mainly due to the government's stimulus policies to promote the rise of the benchmark index of Hong Kong stock market. Zeng Wenkai, managing director of Shengqi Asset Management Co., Ltd. also said that in addition to policy stimulus, there is another reason that the weakening of the RMB has increased investors' demand for US dollar assets. Since the opening of Shanghai-Shenzhen-Hong Kong Stock Connect, mainland investors have bought HK$ 3.3 trillion in Hong Kong stocks. Wenkai said that the future performance of the Hong Kong stock market will depend more on the balance between the demand of mainland investors and the global capital flow. 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.
2024-12-23 -
View detailsGoldman Sachs: Although the Fed is an eagle, Powell is partial to pigeons, and it is still expected to cut interest rates three times next year.
Last night, the Federal Reserve cut interest rates by 25 basis points as scheduled, but the dot plot shows that only two rate cuts are expected in 2025, not the three times previously expected by the market. After receiving the signal, the market quickly adjusted its expectations, expecting a rate cut of 32 basis points in 2025, down from 50 basis points previously. However, Goldman Sachs economist Jan Hatzius and his team said in a report that they still maintain a more dovish outlook, expecting a rate cut in March, June and September next year, but it is important to note that the March rate cut needs to be supported by better inflation data or worse employment data. By March, inflation figures are expected to improve and the labor market will not deteriorate further, Goldman expects. In addition to the three rate cuts in 2025, the Fed will cut rates twice in 2026 and once in 2027, eventually reaching a rate of 3.125 percent. Goldman also notes: Chairman Powell leaned dovish in his press conference, mentioning four times that Fed policy remains "significantly restrictive" and disagreeing with the view that "the federal funds rate is near neutral." But other officials have been more hawkish than expected, and with Trump in office, they are increasingly likely to limit the Fed's room to cut rates because of conditions such as the risk of tariffs. The dovish Powell Goldman Sachs said yesterday's meeting of the Federal Reserve's monetary policy committee (FOMC) contained both support for the bank's dovish outlook and some risks. The support came from Bowell. First, Powell made it clear that he thinks inflation will return to target and that the cooling of the labor market remains a concern. Powell said the return of inflation to target "remains largely on track" and that he is "confident" it will happen. Powell also reiterated that the labor market is not the main source of inflation pressure, that commodity inflation has normalized and that housing is likely to decline further as the catch-up effect wears off. The recent uptick in inflation largely reflects the impact of the stock market on the financial services category, which "doesn't really reflect the strains in the economy." On the labor market, Powell mentioned the view that the labor market has cooled or is gradually cooling at least 10 times, and mentioned the labor market is looser than in 2019 three times. Powell reiterated that this is not necessary for inflation to return to target, but that the FOMC will continue to monitor it. Second, Powell emphasized four times that the Fed's current monetary policy remains "significantly restrictive," indicating that he does not share the recent view of some members that the federal funds rate is near neutral. Other hawkish Fed officials As noted above, the support comes from Powell, while the risk factors come from other Fed officials. First, some FOMC members have been more hawkish than Goldman expected. Recent comments have already suggested that some members have a more hawkish view of the balance of risks to inflation and employment, with one member opposing a rate cut and four members soft opposing at last night's meeting (the dot plot shows they expect rates to be above 4.0% next year). Second, after Trump takes office, the uncertainty of tariffs or the imposition of high tariffs by the United States in the future may limit the Fed's room to cut interest rates. The FOMC may be concerned that tariffs are driving up inflation, so the Fed may choose to slow the pace of rate cuts out of caution, after all, Powell said last night: "When the path is uncertain, you need to go slower." However, Goldman also said that the expected tariffs will not necessarily prevent rate cuts, as they will only provide a one-time boost to core PCE inflation, peaking at 30 to 40 basis points. Moreover, the impact of tariffs on interest rates is two-way, for example, the impact of tariffs in 2019 instead contributed to the rate cut. Risk warning and disclaimer The market is risky and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial circumstances or needs of individual users. Users should consider whether any opinion, opinion or conclusion in this article is appropriate for their particular situation. Invest accordingly at your own risk.
2024-12-19 -
View detailsIs the dollar going up? Analyst: Trump's "duplicity" will not devalue the dollar.
Many fund managers are not optimistic about Trump's possibility of supporting domestic industries by depressing the exchange rate of the US dollar, no matter how he emphasizes this point verbally. Wall Street generally believes that the dollar will continue to strengthen after its recent sharp rise, and may even reach parity with the euro. According to the Financial Times survey, more than half of the banks, including Goldman Sachs, Morgan Stanley and UBS, predict that the US dollar will continue to rise next year. Deutsche Bank even boldly predicted that the exchange rate of the euro against the US dollar would fall to parity in 2025. The exchange rate was around $1.11 in early October, but now it has fallen below $1.05. Since the beginning of October, the US dollar has soared by 6.1%, the best quarterly performance since the Federal Reserve began to raise interest rates in 2022. In recent weeks, the rise of the US dollar has shown signs of stagnation. The current trading price of the US dollar index is 106.9, which is lower than the above 108 hit at the end of last month. Analyst: Trump's "lip service" will not devalue the dollar. Many fund managers are not optimistic about Trump's possibility of supporting domestic industries by depressing the exchange rate of the US dollar, no matter how he emphasizes this point verbally. Sonal Desai, chief investment officer of Franklin Templeton's fixed income, said: "The idea of a weaker currency under Trump is a bit like a pie in the sky, and there are many contradictory factors. So far, most of the policies he talked about seem to be the focus, and in fact they will be beneficial to the dollar, not unfavorable. " Trump has always believed that the strength of the dollar may put excessive pressure on the US economy. In an interview with Bloomberg Businessweek in July, he pointed out that the dollar was stronger and "we are facing a serious currency problem". He further explained that this strong dollar is a huge burden for American companies trying to sell tractors and other products abroad. However, the market generally expects that its growth promotion and proposed tax reduction plan will aggravate domestic inflation. This may lead the Fed to keep higher interest rates for a longer period of time, which in turn may attract more foreign capital into dollar assets. Barclays predicts that by the end of next year, the dollar will strengthen slightly against the euro to $1.04. Ajay Rajadhyaksha, chairman of global research at the bank, said: "Trump's policy is definitely beneficial to the dollar." "Investors will buy more dollars and prepare for the appreciation of the dollar." The possibility of the potential appreciation of the US dollar poses a difficult problem for the incoming government. The analysis points out that any possible solution, such as controlling the government budget deficit or putting pressure on its trading partners, will be extremely challenging and may also damage the status of the US dollar as a global reserve currency. Eric Winograd, chief economist of AllianceBernstein, said that Trump will definitely attach importance to "the importance of the US dollar as the world's major currency, and he certainly does not like other countries to discuss the use of currencies other than the US dollar for transactions". "(Investors) do more dollars and prepare for the appreciation of the dollar, which is the clearest signal they send to the new government." There are also some views that the United States can follow the "Plaza Accord" during the Reagan administration in 1985 and devalue the US dollar in an orderly manner. However, researchers at the Council on Foreign Relations in the United States pointed out that the success of the Plaza Accord was partly due to the declining interest rate in the United States at that time, and the current macroeconomic background and spreads were not conducive to the depreciation of the dollar. In addition, the support of other countries is uncertain. Desai said that although Trump may rely on countries that manage exchange rates, he cannot control the dollar. "He may try to suppress the dollar," Winograd said. "But in the end, fundamentals often win." 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.
2024-12-17 -
View detailsThe federal reserve's interest rate decision hit hard! Global investors focus on the guideline of "neutral interest rate"
The world's major central banks try to manage the economy by setting interest rates at a level that does not encourage or hinder activities such as car buying and construction projects. These efforts revolve around an intermediate figure-interest rate without any stimulus or economic retrogression, also known as "neutral interest rate". This is an important guideline, Zhitong Finance APP noted, because with the inflation year during the epidemic coming to an end, monetary policy makers in developed economies are cutting interest rates, but they are also cautious when cutting interest rates, because new inflation risks appear at the same time. This means that the debate on neutral interest rates will affect how long central banks will continue to cut interest rates. What is the neutral interest rate? Theoretically, neutral interest rate is the interest rate that monetary policy neither stimulates nor restricts economic growth. As Lyle brainerd, former vice chairman of the Federal Reserve, said in a speech in 2018, it is the level of "keeping the output growth close to the potential growth rate in an environment of full employment and stable inflation". Why is this figure so important to the central bank? In the long run, the central bank wants its policies to be consistent with what they consider neutral interest rates. The figure also guides them to think about what level interest rates should be in the short term. If the economy is running below full capacity, they want to ensure that the interest rate is below neutral level to help promote economic growth. On the contrary, if inflation is too high, they hope to keep interest rates above the neutral level to slow down inflation. How does the Fed know what the neutral interest rate is? The Federal Reserve FOMC does not actually know the exact data, but it has an estimate. Central bank governors tend to think that the long-term trend of productivity and demographic structure determines its level. In 2012, when Federal Reserve officials first began to release quarterly neutral interest rate estimates, members of the Federal Open Market Committee provided a median of 4.25%. In the following years, this figure declined, and from 2019 to 2023, it hovered around 2.5%. However, in 2024, it rose slightly every quarter, reaching 2.875% as of September. How does the neutral interest rate estimate affect the Fed's actions? The Fed wants to keep interest rates close to neutral level for the following reasons: The US economy is performing well, so the need to cut interest rates sharply is reduced. But inflation is basically under control, which means that there is little need to maintain high interest rates. In other words, there is no good reason to stimulate or restrict the economy. Therefore, the Fed's recent strategy reflects its efforts to aim at the expected neutral interest rate, and not to fall below it. In early autumn, the Federal Reserve took a relatively radical approach to cut interest rates. At that time, the interest rate was much higher than the neutral interest rate, and in September, it cut interest rates by half a percentage point more than usual. But now, the interest rate will reach 4.33% by the end of the year-only 1.5 percentage points higher than the neutral interest rate estimated by the Federal Reserve-and officials say they can slow down the rate cut. Federal Reserve Chairman Powell said at a meeting on December 4: "We can be more cautious when trying to find neutral interest rates." How does the uncertainty of neutral interest rate affect investors? For investors in the bond market, the debate about where the neutral interest rate is located is becoming more and more important. The yield of US Treasury bonds tends to follow the benchmark interest rate of the Federal Reserve. If the Fed's estimate of neutral interest rate keeps rising, officials will not cut interest rates further, and bond investment may suffer losses. But if the Fed's estimate of the neutral interest rate remains below 3% and the interest rate cut continues, betting on bonds will make a lot of money. Federal Reserve officials will announce the new neutral interest rate estimate in the "economic forecast summary" released on December 18, US Eastern Time, including bitmap and inflation outlook.
2024-12-16