Fed September Rate Cut? US Economy Cooling Down

Fed's Dramatic Shift in Stance

Wall Street Swept by Calls for September Rate Cut

Unexpected Uptick in US Unemployment Rate, One Step Away from Triggering the "Sahm Rule"! Citigroup: The Fed Will Begin Consecutive Rate Cuts Starting in September, Totaling 200 Basis Points!

Federal Reserve Chairman Jerome Powell testified semi-annually on monetary policy to a Senate panel in Washington on July 9th.

Federal Reserve Chairman Powell stated: Compared to our global peers, our economy has performed exceptionally well. Interest rate cuts are not appropriate until the Fed's confidence in persistent inflation moving towards 2% strengthens. Inflation has slowed significantly but remains above the 2% target. Recent labor data indeed indicate that the economy is cooling down.

However, Powell warned that cutting rates too little or too late could pose risks to the economy and the labor market. He also stated that cutting rates too early or too much could hinder or reverse the process of reducing inflation.

US Recession? "Sahm Rule" 100% Accurate

This month's unemployment rate is nearing the trigger of the Sahm Rule, sparking market contemplation on whether the US economy will fall into a recession. According to the Sahm Rule, when the change in the 3-month moving average of the unemployment rate exceeds 0.5 percentage points from its 12-month low, the US economy enters a recession. This rule has been 100% accurate since 1960. With two decimal places, the 3-month moving average unemployment rate is 3.98%, very close to the 4% threshold for the month.

Is the World Economy Contracting?Global markets are experiencing contractions, signaling an economic shift towards a defensive stance. Generally, contractions and large-scale monetary injections need to occur simultaneously to better maintain stability.

Since the Federal Reserve raised interest rates, five of the top ten U.S. banks have gone bankrupt. Numerous small banks have undergone consolidation or bankruptcy.

Europe is also witnessing financial integration. On May 28th, according to insiders, the European Union is about to reach an agreement on measures that will make it easier for struggling small banks to fail or be merged.

Recently in our region, according to statistics from Enterprise Early Warning, since 2024, 83 small and medium-sized banks (including those planned) have undergone mergers and reorganizations, with 32 rural banks, 35 rural commercial banks, 15 rural credit cooperatives, and 1 city commercial bank. The mainstream model for restructuring is the absorption merger followed by the transformation into branches of the main initiating bank.

It can be seen that not only our country but the entire world is consolidating and contracting. This can be described as the economy undergoing supply-side reforms, with the current trend being to organize large entities and clear out small ones across various industries. Including tonight, the Ministry of Industry and Information Technology is taking further action to regulate the photovoltaic manufacturing industry, controlling the unstructured expansion of production capacity. These are all supply-side reform actions aimed at making the entire industry more stable and secure.

The world is entering an era of great powers.

India is on the rise, our country remains strong, and the United States maintains its hegemony. The current world is thus, entering an era of three, four, or five great powers. Great powers engage in strategic maneuvering, small countries engage in direct hot wars, and medium-sized countries engage in drone warfare. Each plays their own game, each seeks their own interests. The economies of several great powers will enter a period of stalemate. For the capital market, there is an overall trend of small countries actively flowing into great powers.

Foreign capital is frantically buying up Indian assets, bonds, and stocks, they want it all. Since the announcement of the Indian election results in early June, foreign investors have returned to the Indian stock market in droves, along with the buying spree of local Indian investors, pushing the Indian stock market to historical highs. It's not just the bond market; foreign capital is "returning" to the Indian stock market, with a net inflow of $4 billion in one month.

The United States is no different, under the continuous high interest rates, global funds are pouring into the United States, driving the rise of U.S. stocks. Although the United States shows signs of recession, the overall economy will maintain high-level operations, and a safe recession is unlikely.

In contrast to the large A-share market, there is a contrast, but since the world's great powers are the most important core, the core assets of the large A-shares are expected to attract the attention of domestic or international capital in the future. Recently, in the market, super leaders have undergone a correction of supplementary declines, and rare super core assets have fallen, creating a rare opportunity. However, bottom-fishing and layout require a certain level of analytical ability. It is not advisable to blindly bottom-fish; one should study well to find stocks that can multiply by a hundredfold. Such companies are generally internationally leading in technology and have an extremely large market share. Study well.