At present, the market's one-sided expectation for the Federal Reserve to cut interest rates is the focus, with even radical sentiments unprepared for the possibility that the Fed will not cut rates. The main theme in the United States is to stimulate the depreciation of the US dollar, which is also a critical period where technical operations may come into play. In reality, the asymmetry of the sensitive US indicators is the focus of the Fed's interest rate cuts, but the market's one-sided thinking may be the very essence and parameter for manipulating public opinion and creating sentiment to facilitate the depreciation of the US dollar. Ultimately, the possibility that the Fed will not cut rates may be the greatest risk and uncertainty that the market is unprepared for.

On one hand, the mixed employment data is not indicative of a deterioration in US employment, let alone an economic recession. The decline in unemployment rates and the lack of variables and follow-up logic in the structural consideration of employment are clearly subject to speculation. The focus on speculation factors is the mismatch between the炒作 of the US "small non-farm" employment and the number of unemployment claims. Additionally, given the significant differences in employment immigration and age groups in the United States, US employment fluctuations are more subject to seasonal habitual characteristics, which interferes with the炒作 of US employment and the Fed's interest rate cuts, seemingly deviating from the facts and raising doubts. However, the depreciation of the US dollar has been effectively supported, with the US dollar index fluctuating within a range of 100 points being a dynamic focus and a key breakthrough point for the week. Currently, the job-shifting phase in the US employment situation is an objective environment for the basic stability of US employment. Compared to corporate layoffs and government assistance, there has been no sharp downturn. The US unemployment rate remains at a historically low level, and the variables in the US economic environment are limited. On the contrary, steady economic growth is a clear supporting argument for the Fed's interest rate hike parameters. Especially, the stability of the US service industry is a key reference related to employment. The growth trend of the US economy is usually characterized by a strong third quarter, and at this time, US employment is closely linked to economic conditions. Currently, the US economy has not been affected by the high interest rates due to market expectations of rate cuts. On the contrary, the so-called high level of interest rates that have remained unchanged for a year has not weakened or impacted the US economy, which is a fact. The Fed's interest rate cut speculation once again confirms that the depreciation of the US dollar is the key move. The US dollar index has significantly depreciated from 106 points in the first half of the year, which is the focus of the "merit" of the Fed's interest rate cut sentiment.

Advertisement

On the other hand, the resilience of the US stock market's bull market cycle is the Fed's policy bottom logic, with strong corporate support. The current technical correction in the US stock market is a mature macroeconomic regulation technique, not the focus of US corporate issues. Especially today, the benefits of US companies are no longer the same as in previous years and the past. The rise in US corporate profit margins and market value is the main cause of the essence and logic of the US stock market. This is what I have always said, US companies have value, and only then do US stock prices have value. Looking only at the market value of US companies, with more than $3 trillion for three companies, this not only far exceeds the capabilities of companies in general countries but also highlights the strength and scale of US core companies. The major underlying logic of this wave of the Fed's interest rate hike cycle is the super-strong corporatization, which is the dual support of the US dollar depreciation and the Fed's interest rate hikes. The bull market cycle of US corporate profits has just begun, and the innovation of US technology companies is the new structure and new driving force of US stock companies. The ability of US stock companies to withstand technical fluctuations and adjustments in the stock market has greatly increased, which is an important sign and parameter for the continuous innovation of new highs in the US stock market and the unchanged bull market cycle. For example, NVIDIA's AI technology has driven its stock price to triple or quadruple, with the highest surge of 159% in 2024, and the stock price increase has exceeded all other semiconductor stocks in terms of stock price and profit levels. NVIDIA's market value once exceeded $3.3 trillion, surpassing Apple, which is almost equivalent to the total market value of the next ten largest chip manufacturers. The cyclical bull market of the US capital market, with corporate structure innovation as the new logic of the US stock market after a big drop, is the main theme of capital game and liquidity changes. In turn, a favorable environment and cycle are the background and cycle for stock index increases, and on the contrary, speculative and technical corrections are also a path, means, and tool to promote stock market increases. Therefore, NVIDIA's sharp drop of about 10%, resulting in a loss of hundreds of billions of dollars, and on the contrary, NVIDIA's profits have doubled beyond the expected level. The support for big ups and downs lies in the fact that corporate profits are the key. NVIDIA achieved a revenue of $30 billion in the second quarter, a year-on-year increase of 122%, far higher than the expected $28.86 billion, with a net profit of $16.599 billion, a year-on-year increase of 168% and a quarter-on-quarter increase of 12%, which is the key support for the stock market. The strength of the US stock market is essentially the strength of the companies behind it.

Currently, as the Fed's regular meeting is approaching, the one-sided market sentiment has the risk of intensifying and reversing. The upcoming release of the US inflation that the market is focusing on is key. On one hand, the reality is that US inflation is still higher than the Fed's basic defined level of 2% inflation. Even if inflation decreases in August, it will not reach 2% in one step. The inflation parameter of the Fed's interest rate hike is still a rational consideration for the Fed not to cut rates or even maintain interest rates and raise rates. On the other hand, based on the current decline in oil prices, the US inflation parameter is adjusted, but relative to the rise in US salary prices and the high and stable housing prices, the new characteristics of the new structure of US inflation, perhaps the US's macroeconomic regulation to grasp the subtle choice of raising US inflation to 3% is an important decision to break the Fed's interest rate cut expectations. The market's excessive expectation for the Fed to cut rates is extremely serious, and there is a lack of defense against the risk of not cutting rates. The rational analysis of the US's fundamentals is very emotional, which is interfering with the normal judgment of US factors. The difference between the current situation of the United States and the traditional routine textbook theories means the risk level. No matter what the United States chooses - to cut interest rates, keep interest rates unchanged, or raise interest rates - it is all conducive to the strategy and plan of US dollar depreciation. The depreciation of the US dollar is the most important thing for the United States to worry about. The Fed's interest rate regulation has reduced the external coordination of interest rate competition pressure, which is an unspeakable strategy and tactic of the United States. Whether the Fed cuts interest rates or not is the key, and mobilizing and manipulating the market to verify the unchanged foundation of US dollar hegemony, and even more multiple combinations, is the essence and new logic of the Fed's monetary policy.