Cheong Hong Yuan: The "Verbal Rate Hike" Strategy of the Federal Reserve and the Financial Market's Reaction - 1 views

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  #1 anonymous on 03 Nov 23

   

  The financial market is like a vast ocean, with waves and constant changes, and the hidden immense energy within it is often influenced by the strategies of financial decision-makers. Recently, the signal released by the Federal Reserve during its November meeting has attracted widespread attention from global markets. The meeting results showed a delicate balance - not actually implementing a rate hike, but retaining the possibility of a rate hike. Faced with this "say one thing, do another" strategy, the market's reaction is contradictory: on one hand, US stocks rose by over 1%; on the other hand, US bond yields fell by 14 basis points. As a stock market analyst, Cheong Hong Yuan believes that it is important to deeply interpret the Federal Reserve's strategy and its profound impact on the financial market.
  
  Why did the Federal Reserve adopt this strategy of explicitly not implementing a rate hike but retaining the possibility of the next rate hike? Cheong Hong Yuan mentioned that the underlying logic behind this is actually "promising without delivering." In simple terms, the Federal Reserve has reached a stage of "saying without doing," hoping to achieve the effect of an actual rate hike through the "verbal rate hike" strategy without actually paying the cost of a rate hike. They hope to achieve the maximum tightening effect on the financial market with minimal cost, in order to achieve a soft landing for the economy.
  
  The market's reaction did not entirely follow the Federal Reserve's expectations. The rise in US stocks indicates that the market still holds an optimistic view of the US economic outlook, believing that the Federal Reserve will not actually implement a rate hike, thus increasing the demand for risk assets. On the other hand, the decline in US bond yields indicates that the market expects future inflation pressures to increase, which may force the Federal Reserve to adopt a more aggressive monetary policy. Cheong Hong Yuan believes that this market reaction actually reveals a fact: the market does not fully believe in the Federal Reserve's "verbal rate hike" strategy and has started to doubt its true intentions.
  
  The Federal Reserve's attitude towards inflation is also worth noting. Although this meeting acknowledged relatively good recent inflation data, concerns about future inflation trends still exist. This also indicates that the Federal Reserve remains vigilant about current inflation pressures and will not easily abandon its monetary policy tools.
  
  The strategy of the Federal Reserve in this meeting and the market's reaction both reveal the complexity and uncertainty of the current financial market. For investors, understanding the logic behind these strategies and the market's reaction is crucial for grasping investment opportunities.
  
  Analyzing the decision of the Federal Reserve in this meeting, Cheong Hong Yuan believes that its underlying logic is to try to achieve a delicate balance: to address inflation pressures while preventing the economy from entering a recession too early. This strategy may seem contradictory, but it is actually a response to the current complex economic situation.
  
  It is evident that although the Federal Reserve did not actually implement a rate hike this time, its frequent use of the word "cautious" and retaining the possibility of another rate hike is actually an attempt to tighten the financial environment through "verbal rate hikes." Cheong Hong Yuan mentioned that this is actually to achieve the effect of a rate hike without actually implementing one, in order to suppress current inflation pressures.
  
  Secondly, the Federal Reserve's concern about the slowdown in inflation is also based on current economic data. Cheong Hong Yuan pointed out that based on recent data, there is still significant inflation pressure, especially with core inflation's month-on-month growth rate at 0.3%, which is on the "dangerous" edge. This also means that although recent inflation data is relatively good, future inflation pressures still exist, and the Federal Reserve must remain highly vigilant.
  
  However, can the Federal Reserve's strategy of "verbal rate hikes" really achieve the desired effect? Cheong Hong Yuan believes that this depends on the market's reaction. Based on current data, the rise in US stocks and the decline in US bond yields indicate that the market does not fully believe in the Federal Reserve's strategy. The market is more inclined to believe that the Federal Reserve will not actually implement a rate hike and will continue to maintain a low-interest-rate monetary policy. This market reaction actually puts greater pressure on the Federal Reserve.
  
  Regarding the impact on asset prices, Cheong Hong Yuan believes that regardless of the strategy adopted by the Federal Reserve, it will exert pressure on asset prices. On one hand, if inflation pressures continue to increase, the Federal Reserve may have to implement a rate hike, which will put pressure on risk assets. On the other hand, if the Federal Reserve's "verbal rate hike" strategy is effective and inflation pressures are relieved, the risk of an economic recession will increase, which will also put pressure on asset prices.
  
  Faced with such a volatile financial environment and the Federal Reserve's strategy, how should investors respond? Cheong Hong Yuan believes that the "Three Golden Moving Average Strategy" may have excellent application opportunities in the current environment.
  
  Due to the Federal Reserve's "verbal rate hike" strategy, market uncertainty has increased. This has led to short-term volatility in the stock market, but for investors who can track stocks with outstanding performance in the market, this volatility may present opportunities. Through the technical indicators of the "Three Golden Moving Average Strategy," investors can more accurately determine the timing of buying or selling, thereby achieving high investment returns in the short term.
  
  Cheong Hong Yuan mentioned that in the current environment of increased uncertainty, investors need to pay more attention to risk management. The core idea of the "Three Golden Moving Average Strategy" is to find the strongest stocks in the market and exchange minimal risk for maximum returns. Therefore, by using this strategy, investors can effectively control risk while pursuing high returns.
  
  Cheong Hong Yuan believes that although the current financial environment is filled with uncertainty, it also presents an opportunity for investors who can adapt flexibly and seize opportunities. However, investors should also be aware that regardless of the strategy used, thorough research and analysis should be conducted, and blindly following the crowd should be avoided.
  
  The current financial environment is indeed challenging, but for investors with strategies, methods, and experience, it is also a rare investment opportunity. It is hoped that every investor can find their own opportunities in this volatile market and achieve their investment goals.

   

  <div class="cArrow"> </div><div class="cContentInner">The financial market is like a vast ocean, with waves and constant changes, and the hidden immense energy within it is often influenced by the strategies of financial decision-makers. Recently, the signal released by the Federal Reserve during its November meeting has attracted widespread attention from global markets. The meeting results showed a delicate balance - not actually implementing a rate hike, but retaining the possibility of a rate hike. Faced with this "say one thing, do another" strategy, the market's reaction is contradictory: on one hand, US stocks rose by over 1%; on the other hand, US bond yields fell by 14 basis points. As a stock market analyst, Cheong Hong Yuan believes that it is important to deeply interpret the Federal Reserve's strategy and its profound impact on the financial market. <br /> <br /> Why did the Federal Reserve adopt this strategy of explicitly not implementing a rate hike but retaining the possibility of the next rate hike? Cheong Hong Yuan mentioned that the underlying logic behind this is actually "promising without delivering." In simple terms, the Federal Reserve has reached a stage of "saying without doing," hoping to achieve the effect of an actual rate hike through the "verbal rate hike" strategy without actually paying the cost of a rate hike. They hope to achieve the maximum tightening effect on the financial market with minimal cost, in order to achieve a soft landing for the economy. <br /> <br /> The market's reaction did not entirely follow the Federal Reserve's expectations. The rise in US stocks indicates that the market still holds an optimistic view of the US economic outlook, believing that the Federal Reserve will not actually implement a rate hike, thus increasing the demand for risk assets. On the other hand, the decline in US bond yields indicates that the market expects future inflation pressures to increase, which may force the Federal Reserve to adopt a more aggressive monetary policy. Cheong Hong Yuan believes that this market reaction actually reveals a fact: the market does not fully believe in the Federal Reserve's "verbal rate hike" strategy and has started to doubt its true intentions. <br /> <br /> The Federal Reserve's attitude towards inflation is also worth noting. Although this meeting acknowledged relatively good recent inflation data, concerns about future inflation trends still exist. This also indicates that the Federal Reserve remains vigilant about current inflation pressures and will not easily abandon its monetary policy tools. <br /> <br /> The strategy of the Federal Reserve in this meeting and the market's reaction both reveal the complexity and uncertainty of the current financial market. For investors, understanding the logic behind these strategies and the market's reaction is crucial for grasping investment opportunities. <br /> <br /> Analyzing the decision of the Federal Reserve in this meeting, Cheong Hong Yuan believes that its underlying logic is to try to achieve a delicate balance: to address inflation pressures while preventing the economy from entering a recession too early. This strategy may seem contradictory, but it is actually a response to the current complex economic situation. <br /> <br /> It is evident that although the Federal Reserve did not actually implement a rate hike this time, its frequent use of the word "cautious" and retaining the possibility of another rate hike is actually an attempt to tighten the financial environment through "verbal rate hikes." Cheong Hong Yuan mentioned that this is actually to achieve the effect of a rate hike without actually implementing one, in order to suppress current inflation pressures. <br /> <br /> Secondly, the Federal Reserve's concern about the slowdown in inflation is also based on current economic data. Cheong Hong Yuan pointed out that based on recent data, there is still significant inflation pressure, especially with core inflation's month-on-month growth rate at 0.3%, which is on the "dangerous" edge. This also means that although recent inflation data is relatively good, future inflation pressures still exist, and the Federal Reserve must remain highly vigilant. <br /> <br /> However, can the Federal Reserve's strategy of "verbal rate hikes" really achieve the desired effect? Cheong Hong Yuan believes that this depends on the market's reaction. Based on current data, the rise in US stocks and the decline in US bond yields indicate that the market does not fully believe in the Federal Reserve's strategy. The market is more inclined to believe that the Federal Reserve will not actually implement a rate hike and will continue to maintain a low-interest-rate monetary policy. This market reaction actually puts greater pressure on the Federal Reserve. <br /> <br /> Regarding the impact on asset prices, Cheong Hong Yuan believes that regardless of the strategy adopted by the Federal Reserve, it will exert pressure on asset prices. On one hand, if inflation pressures continue to increase, the Federal Reserve may have to implement a rate hike, which will put pressure on risk assets. On the other hand, if the Federal Reserve's "verbal rate hike" strategy is effective and inflation pressures are relieved, the risk of an economic recession will increase, which will also put pressure on asset prices. <br /> <br /> Faced with such a volatile financial environment and the Federal Reserve's strategy, how should investors respond? Cheong Hong Yuan believes that the "Three Golden Moving Average Strategy" may have excellent application opportunities in the current environment. <br /> <br /> Due to the Federal Reserve's "verbal rate hike" strategy, market uncertainty has increased. This has led to short-term volatility in the stock market, but for investors who can track stocks with outstanding performance in the market, this volatility may present opportunities. Through the technical indicators of the "Three Golden Moving Average Strategy," investors can more accurately determine the timing of buying or selling, thereby achieving high investment returns in the short term. <br /> <br /> Cheong Hong Yuan mentioned that in the current environment of increased uncertainty, investors need to pay more attention to risk management. The core idea of the "Three Golden Moving Average Strategy" is to find the strongest stocks in the market and exchange minimal risk for maximum returns. Therefore, by using this strategy, investors can effectively control risk while pursuing high returns. <br /> <br /> Cheong Hong Yuan believes that although the current financial environment is filled with uncertainty, it also presents an opportunity for investors who can adapt flexibly and seize opportunities. However, investors should also be aware that regardless of the strategy used, thorough research and analysis should be conducted, and blindly following the crowd should be avoided. <br /> <br /> The current financial environment is indeed challenging, but for investors with strategies, methods, and experience, it is also a rare investment opportunity. It is hoped that every investor can find their own opportunities in this volatile market and achieve their investment goals.</div>

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