As BTC continued to rise to 64k and then to 65k, it was getting further and further away from the low point of the lower shadow line on August 5. At first, the bears might have thought about a second collapse and filling the lower shadow line. Now this hope is becoming increasingly slim. So they pinned their hopes on interest rate cuts . However, on Friday night, Fed Chairman Powell confirmed that interest rates would be cut, and the market did not collapse. This final fantasy was gradually postponed, and people began to wonder whether there would be a big collapse when the interest rate cut was implemented in September.
The bears have such an unyielding fantasy, which is not only not a bad thing, but a great thing from the dialectical perspective of opposites complementing each other. After all, according to the maximum loss principle taught by the teaching chain, the market will always crush the dreams of the most people to get rich quickly and move forward.
Why do so many people comfort themselves with the logic that interest rate cuts mean collapse? Because of historical experience.
On January 3, 2001, the Federal Reserve changed its policy and started to cut interest rates. The rate cut failed to truly reverse the 19.53% collapse of the S&P 500 index. After a rebound of about 3.5 weeks, it continued to collapse sharply and bottomed out more than a year later. Compared with the peak on March 6, 2000, the decline was as high as -50.68%.
On September 18, 2007, the Federal Reserve initiated its first rate cut. Once again, the S&P 500 peaked 3.5 weeks later, then entered a standard collapse mode and bottomed out in 2009, with a maximum decline of -57.77%.
Since the 1960s and 1970s, it seems that every time the Federal Reserve turns to lowering interest rates, it will bring about a major collapse and bear market in the U.S. stock market.
If we look at the unemployment rate, we seem to be able to glimpse the possible logic: it was not the interest rate cut that caused the collapse, but the economic recession and even the market collapse had already begun, and the Federal Reserve was forced to change direction and initiate a disaster-style interest rate cut, but due to the limited transmission speed of monetary regulation, it was too late to save the situation by the time reinforcements arrived.
Therefore, there is the so-called miraculous "Sam's Law" (refer to the article "The U.S. Stock Market is on the verge of death" on the teaching chain on August 3, 2024).
Maybe it’s not that the Fed is cutting interest rates, but rather that the Fed is hesitating and not cutting interest rates fast enough?
In fact, the Federal Reserve is also learning lessons. In 2020, when the U.S. stock market was halted one after another due to the epidemic, the Federal Reserve urgently and unlimitedly eased the currency and quickly opened the super-flooding mode to turn the tide.
Hypothesis: If a recession is already underway, the Fed’s rate cuts are often ineffective. But if a recession is not yet underway, the Fed’s rate cuts may add fuel to the fire.
One way to cheat on data is to only pick out evidence that supports one's own point of view and discard data that does not fit the point of view. Some people with good intentions pulled out 12 cases of interest rate cuts since 1954: 4 bear markets, 7 bull markets, and 1 neutral market.
This shows that a shift to lower interest rates does not necessarily mean a bear market. Even a shift to higher interest rates does not always lead to a bear market.
Looking at the historical charts comprehensively and without bias, it seems that we can only say that after the interest rate hikes begin, it may be a bull market, it may be a bear market, or it may be neither a bull market nor a bear market; after the interest rate cuts begin, it may be a bull market, it may be a bear market, or it may be neither a bull market nor a bear market.
Don't wait for something to happen or try to find a sword by sticking to the boat. Keep your mind still and act according to the circumstances.
