Your Needs Our Focus
Financial Bulletin
-
View detailsThe president of the world's largest asset management firm: Investors underestimate risks, even if the Iran war ends soon.
According to Bloomberg, BlackRock President Rob Kapito said on Thursday that even if the war in Iran ends soon, the impact on economic growth and inflation will persist. Investors' current optimistic expectations are clearly underestimating the risks. He warned that oil prices could still soar to $150 per barrel as damaged supply chains will take time to return to normal. The above remarks have intensified market concerns over investors' excessive optimism. Since the outbreak of the war nearly a month ago, the S&P 500 index of the US stock market has declined by less than 5%, and the performance of traditional safe-haven assets such as gold and US Treasuries has also deviated significantly from historical patterns. Kapito said at the Asia-Pacific Financial and Innovation Conference held in Melbourne that the current market's response to the risk of war in Iran is significantly different from historical experience. Kapito said his biggest concern is that investors have not seriously examined the potential impact of the conflict but have simply assumed an optimistic outcome. "What does this conflict lasting a week, six months or a year mean for the companies I hold?" he said. Kapito warned that even if the war were to end tomorrow, oil prices could still soar to $150 a barrel because it would take time for the disrupted supply chains to return to full capacity. Bloomberg previously reported that JPMorgan Chase strategists had also pointed out that investors were overly complacent about the possibility of war with Iran. U.S. consumer confidence is under pressure and the risk of recession is rising. "This is not a true interest rate shock, but rather a confidence shock in consumer spending in the world's largest economy," Zelter said. He warned that if the conflict persists, the risk of the US economy falling into recession will rise significantly, and the credit cycle will also face greater pressure. Investing involves risks. Please exercise caution. This article does not constitute personal investment advice and has not taken into account the individual investment objectives, financial situation or needs of any particular user. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this article is at the user's own risk.
2026-03-27 -
View detailsThe cost of high interest rates? The Federal Reserve has suffered losses for three consecutive years, with cumulative losses exceeding 200 billion US dollars.
On Wednesday, March 25th, the Federal Reserve released its audited financial statements for 2025, revealing that the central bank recorded an operating loss of 18.7 billion US dollars last year. This figure is significantly lower than the previous two years, with losses of 114.3 billion US dollars in 2023 and 77.6 billion US dollars in 2024. Since 2022, the Federal Reserve has raised interest rates significantly to curb high inflation, resulting in the interest paid on reserves to banks consistently exceeding the income from its bond investments. Currently, the Fed pays a rate of 3.65% on approximately $3 trillion in reserves, compared to 4.4% on $3.4 trillion in reserves a year ago. It is worth noting that the above-mentioned losses do not affect the daily operation of the Federal Reserve. The institution does not need to apply for funds from Congress nor rely on capital injection from the Treasury. Once it makes profits in the future, it will first repay the deferred assets and then remit the profits to the US Treasury. Unlike other federal agencies, the Federal Reserve does not need to seek financial support from Congress to cover losses. When the Federal Reserve's expenditures exceed its revenues, resulting in a net loss, due to its status as a central bank and the absence of a capital structure like that of a regular enterprise, it cannot record a "negative net asset" or "loss carried forward to owner's equity" as commercial banks do. It is not a genuine asset but an accounting expedient used to balance the balance sheet and ensure the Federal Reserve continues to operate within the legal framework. Before this, the Federal Reserve had long been a significant "contributor" to the Treasury. From 2012 to 2021, the Federal Reserve remitted over 870 billion US dollars to the Treasury in total, with as much as 109 billion US dollars in 2021 alone. The market involves risks, and investment should be made with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their particular circumstances. Investment based on this article is at your own risk.
2026-03-26 -
View detailsGoldman Sachs: Will Private Credit Trigger a New Financial Crisis?
Amid the intensifying turmoil in the private credit sector and the successive restrictions on redemptions by several leading asset management institutions, Goldman Sachs economist Manuel Abecasis has made a clear judgment: The pressure in the private credit market itself is unlikely to trigger a large-scale macroeconomic spillover effect, but the broader tightening of financial conditions poses a greater threat. Alternative asset management giants such as Apollo, Ares and BlackRock have recently imposed restrictions on investors due to a surge in redemption requests from retail and high-net-worth clients, raising widespread concerns about whether the private credit crisis will spill over. In a report, Goldman Sachs systematically evaluated the potential impact of private credit losses on the overall loan scale and GDP growth in the economy using a default scenario stress test as a framework, noting that even in an extreme scenario where the default rate rises to 10%, the drag on GDP would only be 0.2% to 0.5%. The report also pointed out that banks have recently accelerated their lending to enterprises, and the overall health of corporate balance sheets remains sound. The growth in AI-related investment demand will also provide support for the credit market, which can partially offset the tightening of private credit. Goldman Sachs emphasized that the greater risk lies in the possibility that the uncertainty surrounding the AI outlook could lead to a broadening of overall credit spreads or a more widespread tightening of financial conditions. However, there are also more pessimistic voices in the market. UBS recently raised its benchmark forecast for private credit default rates to 15% - already far higher than the worst-case scenario set by Goldman Sachs - and warned of the possibility of "chain defaults" and widespread contagion risks, in sharp contrast to Goldman Sachs' conclusion. Private credit scale: Rapid expansion but still marginal According to a Goldman Sachs report, the private credit industry currently holds approximately $1.7 trillion in corporate leveraged loans, accounting for about 4% of all credit in the private non-financial sector. Goldman Sachs pointed out that although the industry has expanded rapidly in recent years, it remains limited compared to the overall size of the financial system. As a reference, residential mortgage loans accounted for about 45% of private non-financial sector credit before the 2008 financial crisis, far higher than the current level of private credit. Goldman Sachs used this to counter the view in the market that the current pressure on private credit is comparable to the 2008 financial crisis, including a similar analogy previously made by Bank of America strategist Michael Hartnett. In terms of current loan performance, the available indicators cited by Goldman Sachs show that overall loan performance as of the fourth quarter of 2025 is roughly on par with the average since 2023. The proportion of underperforming loans in private credit companies' portfolios rose slightly in the second half of 2025, but remained below the level of 2023. Additionally, while the share of loans with payment-in-kind (PIK) options has increased, this mainly reflects the greater inclusion of PIK options in the terms of newly issued loans recently, rather than borrowers being forced into PIK due to financial stress. The proportion of borrowers voluntarily opting for PIK has remained stable recently. Software exposure: The most concentrated risk point The disruptive impact on the software industry brought about by the AI wave is the core catalyst for the recent sharp deterioration in the sentiment of the private credit market. Goldman Sachs equity analysts estimate that the software industry accounts for slightly less than 25% of the loan portfolios of business development companies (BDCs). Meanwhile, the leverage of technology company borrowers is higher than that of other types of borrowers in the private credit sector, and the recovery rate of software loans may be lower than that of other industries - the reason being that software companies lack tangible assets that can be used as loan collateral. Apart from software exposure, fraud incidents in a few large loans and the credit risks accumulated from the rapid expansion of private credit in recent years have also intensified market concerns over the deterioration of loan quality. Goldman Sachs also pointed out that the connection between the private credit industry and other financial institutions has deepened continuously in recent years: insurance companies have significantly increased their allocation to this sector, while also increasing leverage and relying more on short-term wholesale financing; banks have formed closer ties with private credit through providing loans and credit lines. Stress Testing: Quantification of Shocks in Two Scenarios Goldman Sachs set up two default scenarios for stress testing and conducted a quantitative assessment by integrating the observations of equity analysts on the inter-institutional correlation, the conservative estimates of credit strategists on the recovery rate, and the extent to which different types of financial institutions are willing to contract loans under the shock. Under the baseline scenario, the default rate of private credit will rise from around 1% in 2025 to 3% to 4% (corresponding to the lower end of the historical default rate range for leveraged loans), resulting in approximately $45 billion in additional defaults. Assuming a recovery rate of 40%, this would translate to about $25 billion in actual losses. In this scenario, the drag on the loan stock would be around 0.2% or less (equivalent to about 1.5% or less of the total new loan flow), and the drag on GDP would be approximately 0.1%. In an extreme scenario, if the default rate rises to 10% (the upper limit of the historical range for leveraged loans), it would result in approximately $150 billion in defaults. Assuming a recovery rate of 40%, this would correspond to about $90 billion in losses. If the recovery rate for software loans drops to 30%, the losses would expand to approximately $105 billion. Considering the impact on private credit providers such as banks, this scenario could lead to a reduction in private non-financial sector credit of $350 billion to $400 billion, equivalent to 5% to 6% of the total new loan flow, and a drag on GDP of 0.2% to 0.5%. For reference, during the 1990 recession and savings and loan crisis, private sector loan flows declined by about 30%, and after the 2008 financial crisis, they dropped by approximately 55%. Goldman Sachs also pointed out that the contraction in lending will not be transmitted to output decline in a proportional manner - unimpacted lending institutions can partially fill the gap. According to its vector autoregression model based on the financial conditions index and the Federal Reserve's Senior Loan Officer Opinion Survey (SLOOS), a 1% decline in the loan-to-GDP ratio corresponds to a decline in real GDP of approximately 0.3% to 0.4%. The Controversies and Limitations Behind the Optimistic Conclusions Goldman Sachs' conclusion is based on several important premises. The report explicitly mentions that the Iran war can be resolved quickly without triggering a global stagflationary recession and that the AI bubble does not burst. The report also acknowledges that if the shock triggers large-scale psychological panic in the market and leads to the active contraction of lending institutions beyond their direct exposure and regulatory constraints, the indirect effects may exceed the estimates of the existing model. Goldman Sachs also added two technical notes: First, a default on a private credit loan is not as directly equivalent to a monetary loss as it is for other types of loans, because private credit contracts typically contain more covenants that can trigger default protection before a borrower misses an interest payment; second, private credit loans currently occupy a relatively senior position in a borrower's capital structure, which means that a higher default rate on private credit could overlap significantly with losses in other asset classes, posing an adverse factor for the overall market. In contrast to Goldman Sachs, UBS's recently proposed base scenario of a 15% default rate is already far higher than the extreme assumption set by Goldman Sachs, and it has warned of possible "chain defaults" and widespread contagion effects. The significant divergence between the two institutions reflects the high uncertainty in the market's assessment of the risk path of private credit and also reminds investors to be cautious when referring to institutional predictions. Risk Warning and Disclaimer Clause Investing involves risks. Please exercise caution. This article does not constitute personal investment advice and has not taken into account the individual investment objectives, financial situation or needs of any particular user. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this article is at the user's own risk.
2026-03-25 -
View detailsWhat conditions are needed for the Federal Reserve to raise interest rates?
After the market had almost completely priced out the possibility of interest rate cuts, investors began to shift their focus to another direction - could the Federal Reserve possibly resume raising interest rates? The answer given by Bank of America economists is: the threshold is extremely high, but it is not impossible. In a research report released on March 20, Aditya Bhave, an economist at Bank of America Merrill Lynch in the United States, pointed out that for the Federal Reserve to raise interest rates, at least three conditions must be met simultaneously: the labor market remains stable (the unemployment rate is below 4.5%), core inflation further rises (core PCE exceeds 3.2%), and Powell still holds the position of chair. The report holds that the above conditions are most likely to hold simultaneously under the scenario where the Iranian shock is sustained but moderate, corresponding to an average WTI crude oil price range of $80 to $100. In terms of market pricing, the situation has undergone a dramatic shift within this month. Just under three weeks ago, the market was pricing in about 60 basis points of rate cuts this year; now, expectations of rate cuts have almost vanished, and investors' risk assessment of rate hikes and cuts has become more balanced. A Bank of America report points out that supply shocks themselves create a bimodal risk for monetary policy, and the policy direction depends on whether policymakers are more concerned about inflation or employment. The labor market is the primary prerequisite. A Bank of America report lists the stability of the labor market as the top condition for the Federal Reserve to consider raising interest rates. The report cites the 2022 precedent, noting that the Fed was able to raise rates aggressively during the technical recession at that time because the unemployment rate was below 4% and continued to decline, and the average monthly increase in non-farm payrolls was close to 400,000. The report holds that for this round of interest rate hikes to be resumed, the unemployment rate must remain below 4.5%. If the situation is close to the critical value, then moderate wage growth, stable initial claims for unemployment benefits, and the stabilization or recovery of the job vacancy rate will jointly form supplementary arguments in support of the interest rate hikes. Although the Federal Reserve has made it clear that its policy target is employment rather than GDP, resilient consumer demand will provide more room for interest rate hikes. Internal credit card and debit card aggregation data from Bank of America shows that consumer spending, excluding oil and gas, remains strong, indicating that consumers' wallets have not been significantly pressured by rising oil prices. Core inflation must break through the key threshold. Even if the labor market stabilizes, the Federal Reserve still needs to see that the Iranian shock has been transmitted to core inflation in a substantive way, rather than just remaining at the level of energy prices. The report points out that this transmission could occur through two channels: one is that the increase in energy prices raises the input costs of core goods and services - the Federal Reserve estimates that a 10% increase in WTI will contribute about 7 basis points to core inflation over a period of time; the other is that the shock evolves into a broader supply chain disruption similar to that from 2021 to 2022, and the simultaneous rise in current shipping costs and the prices of bulk commodities such as natural gas, fertilizers, and aluminum has already increased this risk. The report indicates that core PCE inflation is currently at an unsettling high level. Both Bank of America and the Federal Reserve predict that the year-on-year reading for February will reach 3.0%. If the core PCE inflation rate reaches 0.24% or higher on a month-on-month basis for three consecutive months in the future, pushing the year-on-year rate to 3.2% or even higher, it may trigger a policy shift. However, the report also points out that if the upward trend in inflation is significantly driven by tariffs, the Federal Reserve may choose to tolerate it temporarily, as the tariff effect is expected to start fading by mid-year. In contrast, a sustained increase in core services inflation will be more alarming to policymakers. In terms of inflation expectations, long-term inflation expectations remain quite stable at present, in contrast to the slight increase seen after "Independence Day" last year. However, the report points out that even if long-term expectations remain stable, as long as the immediate inflation increase is significant enough, the Federal Reserve may still invoke the logic of 2022 and raise interest rates on the grounds of preventing expectations from becoming unanchored. The choice of the chairperson influences the policy threshold. The report lists whether Powell remains at the helm of the Federal Reserve as the third necessary condition for raising interest rates and holds that this factor cannot be ignored in terms of its impact on the policy threshold. Bank of America characterizes Powell as a moderate dove who tends to prioritize protecting the labor market when the risks of inflation and employment are roughly balanced. In contrast, the nominee for the chair of the Federal Reserve, Warsh, is expected to take a more dovish stance, which means that under his leadership, the threshold for raising interest rates will be significantly higher. The report acknowledges that it is difficult to simply categorize Warsh's stance - during his tenure as a Federal Reserve governor and throughout the inflation cycle from 2021 to 2022, he demonstrated a strong hawkish inclination, but his recent public statements have emphasized the urgent need for interest rate cuts, leaving the market uncertain about his policy orientation upon taking office. On the timeline, Bank of America previously expected Warsh to be confirmed before the June meeting, but this schedule now faces the risk of delay. Senator Tillis has made it clear that he will not allow Warsh's nomination to proceed in the Senate Banking Committee until the Powell case is resolved, and he happens to be a key vote in the committee. Powell himself confirmed at the March press conference that if the new chair is not in place by then, he will preside over the June meeting. Bank of America believes that June is the earliest possible meeting for the Fed to start raising interest rates, and whether Powell is still in his position at that time will directly affect this possibility. Risk Warning and Disclaimer Clause Investing involves risks. Please exercise caution. This article does not constitute personal investment advice and has not taken into account the individual investment objectives, financial situation or needs of any particular user. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this article is at your own risk.
2026-03-23 -
View details"International peers are cutting production, while Chinese gold miners are on a buying spree!" Domestic mining enterprises are expected to lead the world in performance this year.
While international gold mining giants are facing a decline in production, Chinese mining companies are turning the high gold price into a performance lever through active overseas mergers and acquisitions and capacity expansion. According to the latest forecast by Bloomberg, driven by high gold prices and aggressive expansion plans, Chinese gold mining companies are expected to continue outperforming their global peers in 2026. Companies such as Zijin Gold International Co., Shandong Gold, and Chifeng Gold are steadily moving towards their profit peaks in 2026. Previously, in 2025, the soaring gold prices and increased production had already pushed the profits of these enterprises to record highs. Earlier this year, gold prices once broke through $5,000 per ounce, supported by geopolitical tensions and safe-haven demand. Although the recent rebound of the US dollar, the rise in oil prices and inflation concerns triggered by the Middle East war have led to a pullback in gold prices - they have dropped by more than 10% since February 28 - the widespread economic uncertainty and risk aversion sentiment may still provide support for gold prices. Chinese mining companies expand against the trend While international rivals are grappling with declining production and limited project reserves, Chinese gold mining companies are striving for higher output and actively acquiring overseas mines. One of the most notable deals was Zijin Gold's acquisition of Canadian Allied Gold for C$5.5 billion (about US$4 billion). Allied Gold operates mines in Africa. This expansion move sets Zijin Gold in sharp contrast to Western rivals such as Newmont Corp. and Fresnillo Plc, which are cutting production this year. "Chinese mining companies are snapping up mines that global giants are shunning," said Eric Xiao, sales director of CMC Markets in Singapore. Although Xiao added that these transactions brought challenges including local instability and operational risks, Howard Lau, a materials analyst at HSBC China, pointed out that Chinese producers are experiencing record profit margins, which will provide strong operational leverage. "With the expansion of production from recently completed or newly acquired projects, as well as organic growth achieved through project expansions, there is still room for profit growth in 2026," Lau said. The performance of domestic mining enterprises is outstanding. Zijin Gold is set to release its first full-year financial report since its IPO in September last year on March 20. The company has previously hinted at strong performance in 2025, with preliminary data showing that its net profit has more than tripled. Bloomberg's estimates suggest that its profit is expected to more than double again this year. Competitor Shandong Gold said its net profit rose by as much as 66%, and market consensus expects it to grow by 70% in 2026. Although Chifeng Gold may have achieved an 81% growth last year, it is expected that its growth rate will slow to 31% this year. International giants face challenges. In contrast, although gold mining companies in Europe and America have reported solid results in recent weeks, concerns over production declines have dampened market sentiment. Hochschild Mining, a British-listed mining company, benefited from the "extraordinary rise" in precious metal prices, with its full-year profit growth exceeding analysts' expectations. Peer Fresnillo reported that its earnings before interest, taxes, depreciation and amortization (EBITDA) jumped by 81%. In the United States, Newmont, the world's largest gold miner, reported record quarterly profits, and Barrick Mining Corp. of Canada also exceeded expectations in terms of earnings. However, due to concerns over capital expenditures and production slowdowns, the share prices of both companies declined after the earnings announcements. Newmont expects its production to decline in 2026, partly due to planned upgrades at some of its mines and a drop in output from its two joint ventures with Barrick Gold. Hochschild's output also slightly declined due to planned work at one of its mines, while Australia's Northern Star Resources Ltd. saw its share price plunge after it cut its production guidance. Expenditure is another concern. Fresnillo's capital expenditure budget for 2026 is higher than expected, causing the share price to fall as investors question when these investments will translate into growth. "Upward potential may hinge on ongoing capital constraints and higher shareholder returns," said Grant Sporre and Umesh Agarwal, analysts at Bloomberg Intelligence. They added that rising costs could put pressure on mining companies' profit margins in the second half of this year. Risk Warning and Disclaimer Clause Investing involves risks. This article does not constitute personal investment advice and has not taken into account the individual investment objectives, financial situation or needs of any particular user. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this article is at the user's own risk.
2026-03-20 -
View detailsLantai Auto makes its debut on the Hong Kong stock market. Introduction of the listing model faces liquidity challenges.
On March 19th, Lantou Automobile officially listed on the main board of the Hong Kong Stock Exchange, becoming the first independent-listed central state-owned enterprise high-end new energy brand on the Hong Kong stock market. The share price of Lantou Automobile rose after initially falling. By the midday close, Lantou Automobile was trading at HK$6.9 per share, down 8% from the opening price of HK$7.5 per share. Lantou's listing on the Hong Kong Stock Exchange this time adopted the "underwriting listing" method - no new shares were issued, no financing was conducted, and all the listed shares came from the privatization and delisting of Dongfeng Group's shares, which were then distributed to the existing shareholders. The advantage of this approach is that it enables a quick listing process without dilution effects, but it also means that on the first trading day, there would be no price stabilizing tools such as cornerstone investors' lock-ups or underwriter's over-allotment mechanisms that are usually provided for IPOs. More direct selling pressure comes from the index level. A Hong Kong investment banker analyzed that since Lantai has not yet been included in the main index's constituent stocks, some global passive funds, after receiving the distributions, need to liquidate these "non-target holdings" on the first trading day or within a short period, resulting in a definite selling pressure. Meanwhile, Lantou has not been included in the Hong Kong Stock Connect. The major source of increased buying in Hong Kong stocks, the southbound funds, will not be able to enter the market in the short term, further reducing the space for buying demand to be met. From the perspective of the market environment, the overall trading sentiment in the Hong Kong stock market has been cautious recently. The Hang Seng Index closed down 1.66% at midday. The Hong Kong automotive sector has also been in a range-bound fluctuation since the beginning of the year, which has added uncertainty to the pricing of Lantai's first day. However, from a fundamental perspective, the operating data of Lantai Auto still maintained a strong growth momentum. From 2023 to 2025, the company's sales increased from 50,300 units to 150,200 units, with a compound annual growth rate of 72.8%; revenue rose from 12.75 billion yuan to 34.86 billion yuan; in 2025, it achieved a net profit of 1.02 billion yuan, successfully turning losses into profits, with a gross profit margin of 20.9%. By the end of 2025, the company's cash and cash equivalents on its balance sheet amounted to 7.972 billion yuan, indicating a relatively abundant liquidity. In 2026, Lantaiu will have a bumper year for product launches. The brand plans to introduce four new models, all equipped with L3-level intelligent auxiliary driving hardware. Among them, Lantaiu Taishan Ultra has recently begun deliveries, and the Dreamer Champion Edition jointly developed with Huawei has also been launched. In the second half of the year, a high-end MPV with the code name "Qufeng" will also be launched. Whether the intensive product launches can translate into sustained sales growth will be the focus of market attention in the future. For Lantou, obtaining the listing approval is merely a ticket to enter the capital market. The company can then decide to conduct private placement or additional share issuance at any time based on market conditions to raise funds. The short-term pressure on the stock price is mainly caused by the listing mechanism and structural factors of the market. The real test for Lantou lies in whether it can use its continuously improving operating performance to obtain a valuation that matches its growth rate in the market. Risk Warning and Disclaimer Clause The market carries risks and investment should be made with caution. This article does not constitute personal investment advice and has not taken into account the specific investment goals, financial situation or needs of individual users. Users should consider whether the opinions, views or conclusions in this article are suitable for their particular circumstances. Any investment made based on this information is at your own risk.
2026-03-19 -
View detailsThe New York Fed's "New York Fed Wire": Powell's "second-to-last" interest rate meeting, the Fed's internal differences intensify.
In the final stage of Powell's tenure at the Federal Reserve, a rare internal rift is surfacing. At tonight's interest rate meeting, as many as three Trump-nominated governors are expected to join forces to cast dissenting votes in favor of a rate cut - this would be the first time since 1988 that three governors have collectively opposed the majority stance at the same policy meeting. This situation foreshadows that the incoming chairperson, Waller, is about to take over a committee with growing fractures. According to Nick Timiraos, the "Fedwire" of the Wall Street Journal on the 17th, the uncertainty caused by the Iran war is expected to strengthen the stance of most committee members to keep interest rates unchanged, but it also makes potential dissenting votes more notable. Stephen Miran, a governor, has supported rate cuts at every meeting since joining the Fed in September last year; Christopher Waller cast a dissenting vote at the January meeting; Michelle Bowman said in a TV interview two weeks ago that the economy "might need support from policy rates". All three were nominees of Trump, who publicly called on the Fed to cut rates immediately last week. The significance of this situation lies not merely in the vote count itself - more importantly, all three board members were appointed by the same president who openly pressured the central bank, and their voting tendencies are highly consistent with the president's demands. Eric Rosengren, the former president of the Boston Federal Reserve, said that if the market believes these board members are acting in a politicized manner, "it would be an extremely dangerous situation." Vincent Reinhart, chief economist at BNY Investments and a former senior advisor at the Federal Reserve, has warned that as Trump may gain more nomination opportunities, investors' predictions about the Federal Reserve "will henceforth be more dependent on political economics rather than macroeconomics." According to CME FedWatch data, the market expects a 99% probability that the Federal Reserve will keep interest rates unchanged within the range of 3.5% to 3.75%. The structural weight of dissenting opinions of councilors The Federal Reserve's interest rate policy is determined by a committee of 12 members, divided into two categories: seven governors are nominated by the president and are based in the Washington headquarters; the other five seats are rotated among the 12 regional Federal Reserve Bank presidents, who are elected by boards of directors composed of local business and non-profit leaders and are not political appointments. Timiraos said that dissenting votes by regional Fed presidents are not uncommon; those by governors have historically been extremely rare and thus carry more weight. This pattern has been disrupted recently. Bowman became the first governor to dissent from a policy decision in 19 years in 2024, when she voted for a smaller rate cut. Last summer, she joined forces with Waller to dissent and support a more accommodative policy, the first time since 1993 that two governors have jointly opposed the chair's stance. At the December 2023 meeting, there were three dissenting votes, but in opposite directions - two regional Fed presidents opposed the rate cut, while Miran advocated for a larger cut. At the January meeting, Miran and Waller again dissented together. The respective positions of the three dissident candidates Timiraos said that the three board members have different emphases in their positions. Miran's stance is the most explicit. Since joining the job, he has never stopped voicing his dissent. Previously, he served as a senior economic advisor to the Trump administration. Waller was seen as a strong candidate to dissent again this week after his dissent at the January meeting. The unexpected decline in non-farm payrolls in February, he believes, reinforces his judgment that the labor market is approaching a "critical point". Bowman, citing the same employment report, said that the economy "might need rate cuts for support". In her December interest rate forecast, she outlined a path of three rate cuts in 2026, more than most of her colleagues. Trump appointed Bowman as the vice chair for supervision at the Federal Reserve last year. However, some former officials question whether the current economic fundamentals support a rate cut. The Iran war has pushed oil prices up sharply, adding another source of inflation in the context that the full impact of tariffs may not yet have been fully transmitted; the Fed's preferred inflation indicator had already exceeded 3% before the war broke out. Jim Bullard, the former president of the St. Louis Fed and current dean of the business school at Purdue University, said: To vote against the majority when core inflation exceeds 3% and continues to move in the wrong direction sends a signal that you don't take inflation seriously. I think this is a hard position to justify. From the boundaries of health heresy to political rifts Timiraos said that several former officials expressed concerns about the evolution of this pattern. They distinguished between two different types of dissent: the occasional breaking of consensus by a director based on their own judgment, and the united voting of all Trump nominees in each meeting in the direction expected by the president. Timiraos cited Rosengren's view that in countries where central banks have been eroded by political pressure, the public eventually loses confidence that officials can take the necessary steps to curb inflation, and this loss of confidence itself makes inflation harder to control. A deeper risk is that surface-level healthy dissent evolves into something like the partisan divide in the Supreme Court - individuals may think they are following independent analysis, but the public sees only partisan positions. This would represent a profound shift for the Fed, as the policy trade-off between price stability and employment has never been split along partisan lines historically. In contrast, institutions like the Bank of England have long been accustomed to split votes on policy decisions. The Fed was able to avoid this situation not because officials always agreed, but because broad consensus allowed the market to focus on the economic outlook rather than speculating which faction would dominate the next decision. Waller himself acknowledged the risk of split votes last year: If a 7-to-5 voting result really occurs, the next time one person changes their stance, the entire interest rate path will be completely altered. All parties are setting up their strategies during the transitional period. Timiraos pointed out that the potential dissenting votes this week are unlikely to be interpreted as a direct challenge to Powell's leadership - Powell's term ends in May and Wallsh is awaiting Senate confirmation. A more likely scenario is that both sides of the committee are using Powell's transition period to define their positions and set the tone for the upcoming policy handover. Hawkish officials may use this week's quarterly projections to clearly express their stance of resisting rate cuts during the period when inflation is above the 2% target. Rosengren said, "More attention will be paid to how it influences the way the new chair views the dynamics of the committee." For regional Fed presidents, the situation this week may also serve as a reminder that the political ecosystem of monetary policy has fundamentally changed. Reinhart said that if Trump gains more nomination rights in the future, this political force will continue to expand. His conclusion is concise and powerful: "This should remind people that in the future, predictions about the Federal Reserve will be more about political economy than macroeconomics." Risk Warning and Disclaimer Clause Investing involves risks. Please exercise caution. This article does not constitute personal investment advice and has not taken into account the individual investment objectives, financial situation or needs of any specific user. Users should consider whether any opinions, views or conclusions in this article are suitable for their particular circumstances. Any investment made based on this article is at the user's own risk.
2026-03-18 -
View detailsThe sharp rise in oil prices and the central bank's interest rate hike? The market's pricing might be overdone.
However, according to the Chasing Wind Trading Desk, the latest strategy reports from JPMorgan Chase, UBS and Goldman Sachs all point to the same conclusion: The market has priced in the linear logic that "higher oil prices equal central bank interest rate hikes" too aggressively, while underestimating the growth cost of the oil price shock. Goldman Sachs characterized the two-week volatility in monetary policy factors over the past two weeks as the third-largest two-week decline since 2000. In a report on March 16, Rohit Arora, a foreign exchange strategist at UBS, directly pointed out that disruptions in oil supply have led to recent oil futures prices being 50% higher than central banks' expectations. The two-week re-pricing range is approaching a historical extreme. The focus in the interest rate market is on the front end. The pricing of "front-end rates moving up over the next 12 months" in most G10 economies has reached its highest level since 2023, with the sell-off in the front end of the pound sterling being particularly pronounced. The US dollar is the only exception - its front-end curve is still pricing in rate cuts over the next 12 months, creating a clear divergence from other markets. But Goldman Sachs pointed out that although short-term interest rates have risen due to hawkish expectations, its interest rate team has actually lowered its forecast for 10-year yields in the US and Germany. The reason is that the downside growth risks will suppress the upward space of the long end. "Downside growth risks will limit the upward space of 10-year yields in the US and Europe," wrote Andrea Ferrario, a portfolio strategist at Goldman Sachs, in the latest weekly report. The strategies of the three institutions all repeatedly emphasize the essential differences from 2022, which is the core support for the current judgment. The opposite is also true on the other end of the logic: If the oil price shock eventually drags the economy into recession, the central bank is even less likely to raise interest rates; if the geopolitical situation eases, inflationary pressure may also dissipate. In both scenarios, the aggressive interest rate hike path currently priced in is unlikely to materialize. Asia's divergence: Inflationary pressure is greatest in the Philippines, South Korea and Indonesia, but the threshold for interest rate hikes remains high. UBS's scenario analysis is based on an average oil price of $85 per barrel: The CPI in the Philippines in 2026 may rise from the central bank's forecast of 3.6% to about 4.3%, deviating from the 3.0% target by approximately 1.6 percentage points; in South Korea, it may increase from 2.2% to about 2.8%, deviating from the 2.0% target by about 1.0 percentage point; in Indonesia, it may rise from 2.5% to about 3.1%, deviating from the target by about 0.8 percentage points. In contrast, the deviation in Malaysia is only about 0.2 percentage points, and in Singapore, it is basically zero. In India, it is slightly below its 5.0% target, and in Thailand, inflation remains below the target even if oil prices rise. In addition, UBS pointed out that the current starting point of real interest rates in Asian policies is already about 225 basis points higher than that in 2022, which further raises the threshold for initiating interest rate hikes. There is a clear gap between the actual actions of major central banks and the aggressive pricing in the interest rate market at present. UBS has classified potential policy paths into three categories: The Monetary Authority of Singapore may take the lead in making moves due to growth factors, and the possibility of a higher-than-baseline policy slope adjustment (0.5% p.a.) in mid-April has risen; if high oil prices persist, South Korea, Malaysia, and the Philippines may have a calibrated interest rate hike in the second half of the year, but this is "not the baseline judgment"; while economies such as India, Thailand, and Indonesia that are in a rate-cutting or easing mode are currently facing more of a pause in rate cuts rather than a shift to rate hikes. When positions are not fully liquidated, it is easier for the mentality of "admitting defeat" to be slapped in the face by the back-and-forth market fluctuations. JPMorgan Chase has observed that the market narrative has rapidly shifted from "buy the dip" at the beginning of the conflict to "bet on a protracted war, new highs in oil prices, and a repeat of 2022". However, technical indicators and position data do not support the notion that a complete liquidation has been completed - the RSI of major markets remains above 30, and position changes more reflect a reduction in risk exposure rather than a widespread shift to net short positions. In the view of the Matejka team, this emotional "capitulation" has instead raised the cost of continuing to short. This structure has also undermined the effectiveness of equity-bond hedging. Goldman Sachs' calculations show that the beta of the S&P 500 to the US 10-year real interest rate and breakeven inflation has both turned significantly negative. This implies that interest rate fluctuations no longer inherently benefit defensive allocations, and the importance of active hedging tools has thus risen.
2026-03-17 -
View detailsA few weeks ago, it was hard to imagine the question: Will the next move of the Federal Reserve be to "raise interest rates"?
Financial markets are beginning to think this could happen. Traders in the derivatives market expect the probability of an interest rate hike this year to be around 25%. This shift in expectations highlights the direct impact of geopolitical conflicts on the global energy market and inflation outlook, causing investors to reprice the Fed's policy path. Analysis suggests that this development not only shattered the market's widespread expectation that the Federal Reserve would continue to cut interest rates, but also injected a high degree of uncertainty into the future direction of monetary policy, directly influencing bond yields and the risk appetite in the stock market. Inflation concerns resurface, and calls for interest rate hikes begin to emerge. Carl Weinberg, chief economist at High Frequency Economics, believes that the Federal Reserve should raise interest rates at the upcoming meeting. He predicts that by this summer, oil prices will push the Fed's favored inflation gauge, the Personal Consumption Expenditures Price Index (PCE), to an annual rate of 3.5%. The Fed's standard script requires officials to "look through" oil price shocks or regard them as temporary, as inflation related to rising oil prices will not last. Bill Adams, chief economist at Comerica, agrees that the Federal Reserve will send a signal that it is open to either raising or lowering interest rates. He said: Adams pointed out that policymakers might signal that they would use tools to prevent energy price shocks from translating into an increase in the trend inflation rate. "This is a conditional willingness to raise interest rates, but not a signal of an interest rate hike in the near future." Investing involves risks. Please exercise caution. This article does not constitute personal investment advice and has not taken into account the individual investment objectives, financial situation or needs of any specific user. Users should consider whether any opinions, views or conclusions in this article are suitable for their particular circumstances. Any investment made based on this article is at your own risk.
2026-03-16 -
View detailsTracking the investigation into Chinese investment banks in Hong Kong: What happened?
Subsequently, an employee of the institution was detained for investigation by the Independent Commission Against Corruption. Guotai Junan International stated that it attaches great importance to this matter and will closely monitor its development. It should be noted that the ECM team is mainly responsible for core equity financing businesses such as pricing of Hong Kong IPOs, new share placements, and refinancing. This is also the reason why the market generally associates the current investigation with matters such as Hong Kong IPOs and placements. It is worth noting that in the past, insider trading in the Hong Kong stock market mostly occurred in projects such as privatization. The rectification of insider trading in the Hong Kong market has a long history. In February this year, the Hong Kong Securities and Futures Commission disclosed a suspected insider trading case involving former assistant vice president of the Listing Division of the Hong Kong Stock Exchange, Chan Cheong-wah, and others. Risk Warning and Disclaimer Clause
2026-03-12