Insight: Beware of the "Good News is Priced In" Effect With the New Fed Chair – Uncertainties Will Peak Between July and November
BlockBeats News, December 29th. Nomura Securities issued a warning, predicting that after the new Fed chair takes office in May next year, he will lead a rate cut in June. However, with the recovery of the U.S. economy, strong internal opposition within the Fed to further rate cuts may weaken not only market confidence in the new chair but also potentially trigger a tense relationship between the Fed and the Trump administration. If the Fed maintains the interest rate after the June meeting, friction with Trump, who demands further rate cuts to boost midterm election prospects, will inevitably arise.
Nomura expects that uncertainty will erupt from July to November next year, during which the market may witness a trend of "escaping U.S. assets," leading to a decline in U.S. bond yields, a stock market pullback, and a weakening dollar. Investors need to be vigilant against a potential liquidity reversal during this period. Major global economies may also halt rate cuts or even begin a hiking cycle during this time, undermining the relative advantage of dollar assets. Policy gridlock, coupled with hitting inflation bottom and signals of the Fed ending the rate-cutting cycle, will intensify market turbulence.
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