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Market expectations shift: Trump hints that Hassett may be appointed as Fed Chairman, which the market quickly interprets as a "dovish" signal, with the probability of a rate cut in December soaring above 89%.
Asset price reaction: Under expectations of loose policy, interest rate-sensitive tech stocks lead the rebound in U.S. stocks, with the Nasdaq 100 index posting a weekly gain of 5.7%; the U.S. dollar index, on the other hand, is under pressure and weakened.
Risk signals emerge: Despite the rise in the stock market, the VIX volatility index jumped 11%, reaching a three-week high, reflecting increasing demand for hedging against future policy uncertainty and potential volatility.
Market conditions
According to CME data, the market expects the probability of a 25 basis point rate cut in December has exceeded 89%, while traders' bets on Hassett becoming the next chairman have soared to 86%.
Expectations of loose policy boost U.S. stocks, with the interest rate-sensitive Nasdaq 100 index gaining 5.7% for the week; the U.S. dollar index (DXY) is under pressure and weakened due to rate cut expectations.
The VIX volatility index jumped 11.07% to 18.16, reaching a three-week high, indicating that investors are hedging against potential market turmoil at the end of the year.
Core driving factors
Trump strongly hinted that Hassett is the only candidate for the next Fed Chairman and canceled interviews with other candidates, greatly consolidating market policy expectations.
The market generally views Hassett as "dovish," believing he will implement a looser monetary policy to stimulate the economy and may take earlier and more aggressive rate cut measures.
Investors interpret this appointment as a return of the "Fed bearish options," expecting the central bank to support asset prices and drive funds towards growth stocks.
Trading strategies and technical analysis
Strategically, one can increase holdings in growth stocks sensitive to interest rates while using the rise in the VIX index for risk hedging.
From a technical perspective, attention should be paid to the two key resistance levels of 6928 points for the S&P 500 index and 25,223 points for the Nasdaq 100 index.
The dollar is expected to enter a weak cycle, and if the dollar index falls below the key psychological level of 99.00, it may trigger a new round of decline.
