The Federal Reserve collectively hinted: We will save you.
The global market is celebrating, with all assets including U.S. stocks, gold, U.S. Treasuries, crude oil, and Bitcoin rising, and not just slightly.
The keyword for Monday is only one: rescue the market.
The following are all in Beijing time:
20:40, before the U.S. stock market opened, Federal Reserve Governor Waller called for a rate cut in December, followed by decisions at successive meetings - this news caused the U.S. stock market to rise at the open.
22:31, as soon as the U.S. stock market opened, news of a China-U.S. call came out - the U.S. stock market expanded its gains.
23:30, the released data showed that the U.S. Dallas Fed Manufacturing Index in November was below all economists' expectations (increasing the probability of a rate cut) - the U.S. stock market's gains further expanded.
01:41, Trump posted, had a very good call, visiting China in April next year—U.S. stocks consolidate their gains.
03:55, 'New Federal Reserve News Agency' reported that San Francisco Fed President Daly supports a rate cut—U.S. stocks confirm their gains, with no signs of giving back the increases.
Daly's speech almost established a rate cut in December; she is not just an ordinary regional Fed chair, but a staunch ally of Fed Chair Powell. Daly's position is consistently 'neutral to hawkish,' and she rarely publicly opposes Powell's stance. When someone like her says 'a rate cut is needed in December,' it is no less than an official hint.
The core of this rise lies with the Federal Reserve; it is a collective emotional peak driven by an 'illusion of rate cuts.' In a normal world, it is impossible for U.S. Treasuries, gold, Bitcoin, and crude oil to rise simultaneously—but they all did on Monday. The market is not rising based on fundamentals, nor even on data, but rather on the emotional expectation that 'the Fed will step in to support.'
There are two points that need special attention:
First, this is a typical, purely emotional 'reflexive rebound.' As we mentioned in the (gold strategy) this morning: for every $10 increase, $4 is due to emotional factors (it can even be higher). This situation will exacerbate the market's risk of 'big ups and big downs.'
Second, the sustainability of this rebound heavily depends on 'whether the data continues to worsen.' Yes—worse data actually makes it easier to support short-term market trends. This is the 'post-cycle counter-logic.'
What we are most worried about is: the market's dependence on the Federal Reserve is becoming heavier, while the real problems remain unsolved. The market is increasingly like a child that has been overly soothed: when it cries, it gets candy; when it falls, it gets expectations of rate cuts (the probability of a December rate cut has exceeded 80%). The problem is that consuming too much candy can lead to health issues.
