The Federal Reserve cuts rates and indirectly 'injects liquidity'! Is silver replacing gold as the new favorite?
Market Review. The market believes that Powell is not hawkish enough, reaching a high not seen in over a month. Silver has performed even stronger, hitting historical highs for four consecutive days this week amid tighter supply. Analysts even predict that silver prices could break the $100 mark next year. The easing cycles of several central banks are about to end, with some even considering raising interest rates. This may be the last rate cut during Powell's tenure. The Federal Reserve is expected to cut rates twice in 2026. Further rate cuts by the Federal Reserve have little significance. Essentially, it is a restart of QE. The average gold price next year is projected to be $4600. This has enhanced the speculative nature of gold. The crude oil sell-off is far from over.
Weekly Major Events
1. The Federal Reserve cuts rates by 25 basis points and initiates a short-term bond purchase plan. Two members supported maintaining the current rate, while one supported a 50 basis point cut. Currently, rates are within a relatively wide neutral rate estimate range, allowing the Fed to patiently wait and observe how the economy evolves further. Rate hikes are not anyone's basic assumption. This decision is to maintain sufficient reserves. It does not signify a change in monetary policy stance. The Fed will become the major buyer, driving down borrowing costs. Non-farm payroll data may have a 'systematic overestimation', potentially inflating job figures by 60,000 each month, and the actual job market may have entered a 'monthly decrease of 20,000' negative growth. The Fed has ample room for significant rate cuts and will make decisions based on its judgment. All 11 regional Fed presidents were unanimously approved for reappointment for five years. Three governors appointed by Trump also supported these reappointment decisions. The labor market continues to slow down. The easing of the job market helps curb inflationary pressures.
2. Will multiple central banks shift towards rate hikes? Is Japan's rate hike next week just the beginning? He hinted that the pace of future rate hikes will not be limited to just one, releasing a clear signal for the policy shift that might be implemented next week. Even if the central bank raises rates this month, the normalization of monetary policy will continue. If the central bank raises rates to 0.75%, it will represent the highest borrowing cost level in Japan since 1995.
The continued weakness of the yen is one of the factors supporting a rate hike in December.
The pace of further interest rate hikes will depend on the economy's response to each hike. Central banks in multiple countries are expected to shift towards rate hikes in 2026, with the European Central Bank, Reserve Bank of Australia, and Bank of Canada all anticipating rate increases. Market traders have virtually ruled out the possibility of further rate cuts, estimating the probability of rate hikes by the end of 2026 to be around 30%.
The market expects the Fed to raise rates nearly twice by the end of next year, with each rate hike being about 25 basis points.
3. Is the Russia-Ukraine peace agreement 'stuck'? Zelensky's proposal for 'reciprocal withdrawal' has sparked disagreements between the U.S. and Ukraine. The core disputes remain focused on territorial and security arrangements. Ukraine insists that Russia and Ukraine must withdraw troops simultaneously according to reciprocal principles, opposing any unilateral concessions. Ukraine believes that some suggestions conveyed by the U.S. essentially stem from Russia's position, clearly harming Ukraine's interests. Any buffer zone arrangements must be reciprocal, with Russian troops needing to withdraw simultaneously, and territorial compromises can only be fair compromises, with the final decision making power resting with the Ukrainian people through elections or referendums. Ukraine's neutrality, non-alignment, and denuclearization are the starting points for solving the problem, and Ukraine may join the EU on January 1, 2027, which will overturn the EU's 'performance-based' accession process.
4. The U.S. seizes a Venezuelan oil tanker, and Venezuela claims: 'International piracy'. The U.S. continues to crack down on Venezuelan oil trade. 'International piracy', this oil tanker carries approximately $80 million worth of oil, equivalent to about 5% of Venezuela's monthly imports of goods.
5. The U.S. says it will allow NVIDIA to sell H200 chips to China, and the Ministry of Foreign Affairs responds. China has consistently advocated for mutual benefits through cooperation between China and the U.S.
6. Is SpaceX planning to go public next year? Musk: True
SpaceX's target valuation for this IPO is about $1.5 trillion. If it sells 5% of its shares as planned, the fundraising will reach approximately $40 billion, and total wealth is expected to increase from $460.6 billion to $952 billion. Commercial Starlink is SpaceX's largest source of revenue.
7. After a sharp rise, Mohr Threads issued a risk warning announcement, and the stock price corrected. The company's current new products and new architecture are in the research phase, and the new products have not yet generated revenue. There will be no significant impact on the company's operating performance in the short term.
8. Meta's strategic shift: From open source to closed source, Zuckerberg bets on AI commercialization. Meta's new model has been named 'Avocado', expected to be released in spring next year, and may be launched as a closed-source model. AI is reportedly established as Meta's top strategic priority.
9. Netflix just made a move, and Paramount 'intercepts': A $100 billion merger battle tears Hollywood apart. Paramount emphasized that its offer is superior to Netflix's in terms of value and certainty, and it bypassed WBD's management to directly pressure shareholders.
10. OpenAI launches ChatGPT-5.2, plans to cancel the red code alert in January. The weekly user base of ChatGPT has exceeded 800 million, surpassing or matching top industry professionals. Disney announced a $1 billion investment in OpenAI.
11. The first litmus test of the AI bubble: Will Oracle's stock price hold up? Oracle has been aggressively expanding its AI infrastructure and issuing huge bonds recently, raising investor concerns about returns. The market is skeptical of its high valuation and customer dependency.