Market, how can so lead?

Within 24 hours, the world’s five largest central moms (the United States, Europe, China, Japan and Britain), there are three interest rate results have come to an end.

First look at the global central mom in the central mom – the Federal Reserve.

As expected by the market, after the 2-day meeting, the Fed decided to raise interest rates by 25 basis points, the benchmark interest rate came to 4.5%-4.75% range, at the same time, Fed Chairman Powell also said that it will maintain the same pace of reduction of $60 billion / month U.S. debt holdings and $35 billion / month MBS reduction since September.

Powell on the one hand admitted that inflation has slowed down; on the other hand still expressed the absolute level of inflation is still high, the future will still raise interest rates at least once, with a special emphasis on the relatively small possibility of a rate cut during the year.

It is interesting to note that this is a policy statement “in line with market expectations”, and Powell’s expression is slightly hawkish, but the performance of risk assets (represented by U.S. stocks), but the Fed’s statement as “dovish”, U.S. Treasury yields fell U.S. stocks soar……

17 hours after the Fed announced its interest rate resolution, the Bank of England announced its own interest rate resolution.

As expected by the market, on February 2, local time, the Bank of England announced that the benchmark interest rate will be raised from 3.5% to 4%, which is also the tenth consecutive interest rate increase carried out by the Bank of England since December 2021.

The Bank of England said in the minutes published on the same day that headline inflation has started to fall slightly and will continue this trend during the year from the trend in energy and other commodity prices, but the U.K. labor market remains tight, with price and wage pressures exceeding expectations and inflationary pressures still a continuing risk.

One hour and 15 minutes after the Bank of England announced its rate hike, the ECB, the world’s second central banker, also announced its own interest rate resolution.

As expected by the market, the ECB’s Governing Council decided to raise interest rates by 50 basis points at its monetary policy meeting in Frankfurt, Germany. The refinancing rate rose to 3.00%, the marginal lending rate to 3.25% and the deposit rate to 2.50% among the three main interest rates, marking the ECB’s fifth rate hike since July last year.

In the role of continued interest rate increases, the Eurozone inflation rate has fallen for three consecutive months, but there is still a large gap from the 2% target set by the ECB.

With the Fed’s interest rate resolution out, the market unanimously interpreted as “dovish”, so risk assets rose, when the Bank of England and the European Central Bank interest rate resolution out, the UK and European stock markets are also rising.

Here’s the problem –

The three major central moms, obviously just slowdown interest rate hikes, and did not mention stop raising interest rates, not to mention cutting interest rates or something, to the U.S. stocks as the representative of the global risk markets (including our big A shares), before the interest rate meeting, has been up for more than a month, and then after the news came out, but also continue to soar, what is this twitch?

As I just said in the narrative, “as expected by the market”, that is, the three central banks, the market has been expected, even including the wording of the central bank or something, in fact, the market has been expected to.

Then, according to the “expected to cash in” this idea – news buy, confirmed sell: the risk market, represented by the U.S. stocks, the market has been the most important.

Risk markets, represented by U.S. stocks, should not be a big drop?

Why instead is a big rise?

In my opinion, the answer is simple –

In January, the price of risky assets was low enough.

However, with the Fed not yet substantially easing monetary policy – it should be said that the Fed monetary policy, which is still in the process of tightening, is only slowing down the pace of tightening – is it not a bit too leading for the market to rise so much?

According to some of my personal views, regardless of U.S. stocks or shares, in the next period of time, there is a high probability that will enter a period of relative silence, or may produce a certain magnitude of decline, or may be in a price repeatedly horizontal.

By the way, at the end of November, in the article “The biggest bankruptcy”, I had given a consultation to some paid investors, telling them that there might be a 5-10 times investment opportunity in a year, and six investors paid to participate at that time.

Based on the current asset price situation, even if the price point they bought at that time was not too good, the profit in dollar terms should be about 3 times, and if they bought at a better price, or did the optimal management of capital, the return has been more than 5 times.

At this moment, I would like to remind them that from a conservative point of view, they should consider cashing out part of their profits at this time, or at least taking out the entire principal invested, which may be considered part of the capital management.

Thank you for your trust and I am glad that the market has given us luck and opportunity this time.

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *