Under the spotlight of the world, Powell finally spoke out: "Now is the time to adjust policy!"
This statement, like a ray of sunlight in the dawn, illuminated the hearts of investors. It implies that the timing for the Federal Reserve to cut interest rates may have arrived! Previously, the market had already reached a consensus on a rate cut in September, but Powell's remarks still inspired the troops, and after speaking yesterday, the U.S. stock market saw a significant surge! It is evident that Powell's speech signals that a rate cut by the Federal Reserve next month is almost a done deal. At the same time, it also means that after the Fed's interest rate hike cycle was paused last year, the interest rate cut cycle is finally about to begin!
As the ancients said: "When mountains are heavy and waters are complex, it seems there is no way out; but then willows are dark and flowers are bright, and there is another village." As we have mentioned before, the most core signal for the end of this market adjustment could be a comprehensive repair of the domestic fundamentals, and the other is the substantial release of overseas liquidity. Now, the repair of domestic fundamentals is still weak, but if the Federal Reserve takes the lead in cutting interest rates, it is at least a positive sign.
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Although a rate cut by the Federal Reserve is not a necessary factor for the rise of A-shares, its positive effects are self-evident:
On one hand, a rate cut by the Federal Reserve will change the direction of global capital flows, leading to a devaluation of the U.S. dollar, and the prices of imported goods from the U.S. may decrease. The devaluation of the U.S. dollar will also alleviate the pressure on the depreciation of the Chinese yuan;
On the other hand, a rate cut by the Federal Reserve may attract some funds to flow into our country's capital market, especially the funds flowing into the stock market may increase;
If domestic measures follow suit and further loosen to release liquidity, both reserve requirement ratio cuts and interest rate cuts are highly likely to be seen, which is also conducive to the improvement of the valuation levels of domestic stocks and other risky assets; if the release of liquidity can improve the economy, the current bottoming profitability of listed companies will also improve, which in turn will further boost stock prices and valuation的提升.
Of course, this is only theoretical, as the core of the market's upward movement still lies in the domestic economy. However, it cannot be denied that the continuous establishment of signals for a rate cut by the Federal Reserve indicates that a rate cut may be imminent!
So for A-share investors, although the market sentiment is very accumulated and everyone's mood and confidence are very low, now is the time to cheer up and prepare for the market's possible short-term rebound and medium-term bottoming out followed by a reversal!
Firstly, closely monitor the timing of the market's shift. At present, the signal for the end of this round of adjustment has not yet appeared, but if the Federal Reserve confirms a rate cut, this is at least a positive sign, a sign that everyone should not be blindly pessimistic, and should be prepared for strategic adjustments. If liquidity is released and the domestic fundamentals can further rebound, the timing for the market's shift will not be far off;Secondly, a short-term rebound can be anticipated to some extent. After a continuous short-term adjustment and reaching a new low for the phase, a resonance of declines occurs, while the technical side emits multiple signals. The Federal Reserve's recent stance has also been relatively positive, suggesting that a short-term rebound may emerge at any time. The market is currently in disarray, but trends often emerge from pessimism. If the Federal Reserve cuts interest rates in September, a minor rebound in September can still be expected.
Thirdly, it is a good time to select quality targets. From a medium-term perspective, do not empathize with the market or indulge in blind pessimism and complaints. At this moment, after nearly three years of adjustment, many assets have become very cheap. Some smart investors have actually started stock picking. Therefore, more investors should take note that this is a good time to select quality stocks. It is not necessary to follow immediately, but once the market shows signs of stabilization, being the first to get on board will give you an advantage, or rather, an advantage in terms of holding costs!
