Federal Reserve Chairman Powell released hawkish remarks at an event in Dallas this morning (15th) Taiwan time, saying that the US economy has performed very well recently, giving the central bank the space to cautiously cut interest rates, and that if economic data allows, a gradual rate cut would be wise as the economy approaches the so-called neutral rate level.
The economy has not signaled any urgent need for a rate cut, and the better economic conditions give us the ability to act cautiously in our decision-making.
The appearance of the hawkish signal, combined with the post-election market sentiment fading, led to declines in both Bitcoin and the four major US stock indices earlier.
Bitcoin Once Broke Below $87,000
Bitcoin first had a rapid decline after the US stock market opened last night, and then fell again after Powell's speech around 4 am, reaching a low of $86,666 around 7:30 am, a drop of 2.76% in the past 24 hours.
Market Expects Fed to Cut Rates by 1 Basis Point in December, Probability Drops to 58%
On the other hand, the Bureau of Labor Statistics also released data last (14th) night showing that the US October PPI rose 0.2% month-on-month, revised up from 0% to 1% previously, in line with expectations, but the October PPI index was still higher than September; the October PPI rose 2.4% year-on-year, higher than the market's previous estimate of 2.3% and exceeding the 1.8% increase in September.
At the same time, the core PPI excluding food and energy rose 0.3% from September, higher than the 0.2% increase in September and also higher than the market's previous expectation; the year-on-year increase was 3.1%, higher than the estimated 3.0% and the 2.8% in September.
This indicates that US October PPI data shows that US inflation still has stickiness, so the market believes that the Federal Reserve (Fed) will take a more cautious approach in its subsequent interest rate decisions.
As of the time of writing, according to the CME Group Fed Watch tool, the market expects the probability of the Fed cutting rates by 1 basis point in December has dropped significantly from 82.5% the previous day to 58.9%, while the probability of keeping the current interest rate unchanged has risen to 41.1%.
Four Major US Stock Indices Fell
The four major US stock indices also fell across the board last night:
- The Dow Jones Industrial Average fell 207.33 points or 0.47% to close at 43,750.86 points
- The S&P 500 index fell 36.21 points or 0.61% to close at 5,949.17 points
- The Nasdaq Composite fell 123.07 points or 0.64% to close at 19,107.65 points
- The Philadelphia Semiconductor Index fell slightly by 1.70 points or 0.03% to close at 5,004.59 points
Wall Street Analyst: The Volatility Index Shows That US Stocks Remain Healthy Before the End of the Year
After Trump's victory, US stocks continued to surge, but as the US stock market capitalization has become increasingly high, many investors have also begun to worry whether the bubble is on the verge of bursting?
In this regard, Nicholas Colas, founder of Wall Street research firm DataTrek Research, recently said that he expects the volatility index (VIX), which measures market bubbles, to remain at a healthy level before the end of the year:
The volatility index can provide traders with guidance on the health of the market, and although the major US stock indices hit new all-time highs on Monday, the volatility index remains in a healthy state and is likely to remain healthy by the end of this year.
However, Karen Karniol-Tambour, chief investment officer of the world's largest hedge fund Bridgewater, has also recently warned investors that while US stocks still have some upside potential, the current exposure level is no longer suitable for continued buying:
What you can't ignore is that people's exposure to the stock market today is very different from normal times, and the risk is now very high.
Trump's victory has to some extent been beneficial for growth, but you also need to be aware that Trump may also bring a rebound in inflation, and although the outlook for the stock market is still optimistic, you need to learn to diversify your investments.
