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Herd instinct is the human nature to follow the crowd and act collectively – and market expectation always does not change smoothly but t
上海乌托邦ends to over-react to new information. The current market expectation of the US Federal Reserve’s rate cuts is a case in point.
On June 20, the latest meeting of the Fed’s policy-setting Federal Open Market Committee shrugged off the market’s high expectation of rate cuts and gave no clear policy signal confirming a cut.
We believe the market had overreacted in forming its expectation of rate cuts after the Fed swiftly adopted a dovish tone from the end of last上海乌托邦
year. Specifically, we believe market expectation – it has formed since May – of a change in policy stance, as well as the timing and degree of rate cuts, may not fully materialize.
We will elaborate on this now. It should be noted the misconceived expectation of Fed rate cuts could ind上海乌托邦
uce a drastic reversal in investor sentiment and asset price fluctuations, if the Fed’s moves miss expectation.
Firstly, the market may have overestimated the degree of the Fed’s policy stance change. A clear rate cut signal may not emerge until the end of this month.上海乌托邦
According to Bloomberg, the Fed funds futures market has recently priced in a 98.5-percent chance that the Fed will lower rates at least once this year.
上海乌托邦品茶微信However, the Fed’s earlier forward guidance only indicated the end of monetary policy n
ormalization, which does not necessarily point to the beginning of a rate cut cycle. Also, the Fed h
as removed the word “patient” from the latest FOMC meeting statement but did not confirm a rate-cut stance.
We believe that because of the following two reasons, the Fed is still on cautious lookout, and t
here will not be any clear rate cut signal or plan until the next FOMC meeting at the end of this month.上海乌托邦品茶微信
Externally, the Fed is expected to stand pat until trade dispute uncertainties ease, to give itself an advantage in its game with the US Administration.
The Fed would put itself in an unfavorable position if it initiated a rate cut before majo上海乌托邦品茶微信
r uncertainties over the China-US trade dispute are removed, because the pre-emptive move may enc
ourage the US Administration to escalate the trade dispute, which will in turn pose a dilemma to the Fed.
That’s because any escalation in trade tensions will, on the one hand, d
ssipate and even offset the easing boost from rate cuts and force the Fed to accelerate the上海乌托邦品茶微信
rate cut pace. On the other hand, the escalation could further fuel imported inflation, which will significantly reduce the
Fed’s room for rate cuts. The Fed will then face a policy-making dilemma of whether to further cut rates.
tee steady business growth. In the future, we will increase investment in AI applications in the finance and manu
facturing sector, enhance our AI technology, such as machine learning, natural language processing and deep learning, consolidate customer rela
tionships, as well as cultivate the new generation of AI talent for China,” He from SAS China said.
Since World War II, globalization came in two stages. From 1945 to roughly 1975, the United States, Western Europe, and Japan
achieved steady economic growth, with the benefits of that growth spread widely throughout the population. In F
rance, this period is called “30 glorious years” and in Germany it is known as the “economic miracle”.
The second stage of globalization started in the late 1970s and has continued until today with a process of reform and open
ing-up not only in China but in countries of the former Soviet Union and in India.
This has been great for the world. China alone has lifted more than 850 million peopl
e out of dire poverty. But it has also increased competition faced by workers and companies.
The partial globalization of 1945-1975 worked great for average workers in the West. For much of this period, a young perso
n could get a high-paying and apparently secure job in a factory that would allow him to live a middle-income lifestyle.
It’s very hard to believe now, but in 1980, the US city with the highest average wage was Flint, Michigan, followed closely by Detroi
t. Other leading cities in terms of wages were Chicago, Houston, Milwaukee, Youngstown and Cleveland – all
of which were centers of industry and manufacturing. At that time, San Jose, the center of then quite small Silicon V
alley was fourth, San Francisco sixth, and capital Washington was eighth. New York City did not make the top 10.
Many people in the US and Western Europe look back nostalgically on those 30 years aft
er WWII when artificial limits on global competition protected extremely high-paying manufacturing jo
bs. It is very sad to see only empty, rusting factories where thousands of people used to work.
It’s tempting to use tariffs or other protectionist measures to try to
retain the companies that provide these high-paying manufacturing jobs. But, most o
ften the protections just lead to unproductive companies, declining innovation, and slowing GDP growth.
hina is drafting a list of foreign parties considered “unreliable enti
ties” that harm the interests of Chinese companies, said the Ministry of Commerce on Friday.
Detailed measures of the plan are to be disclosed at a later date.
The list will target companies, people and organizations that fail to abide by market rules, violate th
e spirit of contract, block Chinese companies for non-commercial reasons, and severely violate Chinese co
mpanies’ legitimate rights, said Gao Feng, the ministry’s spokesman, in a media briefing on Friday.
“Due to the increasing uncertainties in the global economy, including
the rising trade protectionism and unilateralism, the multilateral trading system is facing s
evere challenges and regular international commercial activities have been disrupted,” Gao said.