December 13, 2024
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Fed Rate Cut Expectations Reemerge

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On the evening of December 5,the U.S.Department of Labor released data that has captivated financial markets.According to the report,the number of first-time unemployment claims in the week ending November 30 reached 224,000,exceeding market expectations of 215,000.Conversely,for the week ending November 23,the number of continuing unemployment claims saw a decline of 25,000,bringing the total down to 1.87 million.

A closer examination of the data indicates a pronounced trend of layoffs primarily affecting the technology and automotive sectors.In the tech industry,rapid advancements in technology coupled with a shifting competitive landscape have compelled certain companies to confront challenges related to business restructuring and cost control.As a response,these businesses are resorting to layoffs to enhance their operational efficiency and reduce expenses.Meanwhile,the automotive industry is grappling with various factors including fluctuations in the global economy,the rise of electric vehicles,and supply chain adjustments,all of which contribute to operational challenges and necessitate layoffs as a strategy for survival.

At this juncture,the financial market's focus is intensely directed towards the non-farm payroll report,a critical factor that will influence the Federal Reserve's stance on potential interest rate cuts.This report is set to be released later tonight.John Flood,the Head of U.S.Equity Sales Trading at Goldman Sachs,has issued a serious warning: should the non-farm employment figures surpass 275,000,it would indicate a robust performance of the U.S.labor market.

In such a scenario,the Federal Reserve is likely to adopt an extremely cautious approach.Strong employment figures are typically seen as a potential signal of an overheating economy,prompting concerns about rising inflationary pressures.This could lead to adjustments in monetary policy,creating uncertainty and subjecting the stock market to increased selling pressure.

Conversely,if non-farm employment numbers fall short of expectations,markets might anticipate a more accommodative monetary policy from the Federal Reserve,often prompting stock market rallies.Currently,forecasts suggest that the likelihood of a 25 basis point rate cut by the Federal Reserve in December has risen to 77.5%,while the probability of no cut stands at a mere 22.5%.This expectation significantly influences short-term market sentiments and capital flows.

Interestingly,a recurring observation in the behavior of the U.S.stock market reveals a tendency for price drops before the Federal Reserve implements rate changes.However,following the implementation of such changes,the market frequently rebounds to set new historic highs.In stark contrast,investors in the A-share market seem to be caught in a cycle of turmoil over similar news,possibly due to an excessive focus on external factors while overlooking internal dynamics.If investors could shift their gaze away from these external influences,it is conceivable that the A-share market would perform better than it currently does.

When discussing the A-share market,several points warrant further consideration:

1.Regarding the United States' decisions to increase tariffs and impose export restrictions,these measures are designed to bolster domestic demand while weakening external reliance.Nonetheless,the implications of these policies are significant,particularly for tech firms.The layoffs reported last night serve as a prime example,highlighting the considerable challenges faced by the U.S.tech and automotive sectors.

On the domestic front,a shift towards boosting domestic demand and enhancing competitive capacity is already underway.Recently,the Ministry of Finance announced that within government procurement processes,domestic products would receive a 20% preferential price assessment compared to non-domestic goods.This development bolsters the belief that domestic brands will rise,with "new productive forces" and "hard technology" also positioned for growth.

2.Since September 24,the introduction of various monetary policy tools has become apparent,with the most noticeable effects arising from increased repurchase agreements and relending initiatives.Many publicly traded companies are showing their commitment by opting for share buybacks.Furthermore,numerous enterprises are utilizing their own funds for repurchases,helping to enhance returns for shareholders!

Simultaneously,the CSI A500 ETF has injected substantial incremental capital into the market.This means we currently have numerous channels of capital inflow,coming from equity ETFs,publicly listed companies,and domestic institutions—all contributing to market liquidity.Where there is capital,there exists a market!

3.It is encouraging to observe that our market is gradually regaining vitality and restoring investor confidence.It is crucial to understand that no market exclusively experiences upward movement; the realm of investing is characterized by prolonged periods of stock selection and waiting,with less than 5% of the time devoted to executing trades that yield profits during fleeting moments.

 

As A-shares prepare to close the day positively,they are also gearing up for the commencement of the next round of market momentum!