Market Conditions

Interest Rate Cut Expectations Fully Priced In: The market has fully priced in the expectation of a 25 basis point rate cut by the Federal Reserve (probability 99.5%), with the focus shifting to the future pace of rate cuts and the plan for reducing the balance sheet (QT).

Impact on Asset Prices: The expectation of rate cuts has led to a weaker dollar, benefiting risk assets such as stocks, cryptocurrencies, and gold.

Core Driving Factors

Weak Economic Data: Weak demand in the labor market, a decline in the consumer confidence index (October at 94.6), and a slowdown in economic activity are the main reasons for this "risk management" rate cut.

Liquidity Considerations: The market expects the Federal Reserve may simultaneously announce a halt to balance sheet reduction (QT) to alleviate pressure on money market liquidity.

Trading Strategies and Risks

Asset Allocation: Rate cuts benefit risk assets (stocks, cryptocurrencies) and gold. Under the long-term trend of rate cuts, there are also opportunities in the bond market.

Main Risks: Be wary of "sell the fact" corrections after the rate cut is implemented, as well as the uncertainty in Powell's statements following the meeting. Volatility is expected to increase before and after the decision, so leverage should be used cautiously.