PANews reported on December 16th that Chloe (@ChloeTalk1), a columnist for HTX DeepThink and a researcher at HTX Research, analyzed that although the Federal Reserve cut interest rates as expected and released dovish signals in its dot plot and policy rhetoric that significantly exceeded market expectations, the US financial markets did not see a consistent return to risk appetite. Instead, the real challenges surrounding artificial intelligence are having a sustained impact on market sentiment, including valuation digestion pressures, longer capital expenditure return cycles, and increased uncertainty in earnings realization. This has led to a complex and divergent trend in the performance of US stocks and bonds.
Judging from the bond market's reaction, long-term US Treasury yields generally rose this week, with the 10-year Treasury yield actually increasing by about 5 basis points during a typical "Fed rate-cutting week." This counterintuitive trend indicates that the market did not simply price in the rate cut as the start of comprehensive easing, but rather reassessed inflation stickiness, the supply pressure of US Treasury bonds against the backdrop of fiscal deficits, and the marginal improvement effect of the rate cut on the real economy and corporate profits. From a pricing perspective, this is more like a pre-emptive discount on the "effectiveness of easing policies."
The key factor truly determining market direction remains inflation data. The US November CPI year-on-year rate and core CPI year-on-year rate, along with month-on-month data and initial jobless claims released Thursday evening, will serve as the core pricing anchor for the dollar and risk assets. With the current CPI still around 3%, significantly higher than the 2% target, market focus has shifted from "whether to cut interest rates" to "whether a rate cut is reasonable and sustainable." If the CPI data is significantly lower than expected, it will further validate the rationale for the Fed's current shift to easing, potentially putting downward pressure on the dollar, while risk assets may see some recovery. Conversely, if inflation remains strong or stubbornly persistent, the market will re-evaluate the risks of "premature easing," potentially leading to a dollar rebound and increased volatility in interest rates and the stock market.
Overall, the Federal Reserve has completed its policy shift, but the market is still waiting to see if this shift can truly translate into improved growth and a rebound in profits. With the AI narrative cooling and long-term interest rates remaining high and volatile, the market is more likely to price in inflation data and policy expectations repeatedly in the short term, rather than entering a clear, one-sided trend.
