The Federal Reserve has announced a rate cut, and in 12 paragraphs, understand that the long bull run has just begun!

One-sentence comment: A 25bps rate cut is in line with expectations.
The median interest rate cut of 3 times within the year in the dot plot (SEP) appears slightly dovish, but the economic forecast and Powell's statements at the press conference are "not dovish enough." Risk assets initially rose and then fell, with overall changes being minimal.

The three rounds of interest rate cuts in the United States since this century have each triggered a dramatic redistribution of wealth.

The first interest rate cut from 2001 to 2003 was in response to the burst of the internet bubble, which created a huge era of internet stocks, leading to the rise of companies like Google and Amazon.

The second time was from 2007 to 2008, followed by interest rate hikes, which triggered the financial crisis.

In response to the crisis, we urgently launched a "four trillion" stimulus plan, and the prices of houses also rose accordingly. How many people have achieved social mobility thanks to their properties?

The third time was in 2019-2020, when the US stock market rose first and then fell. At the same time as we lowered interest rates, we also introduced corresponding stimulus measures to cope with the impact of masks on the global economy.

Now, the Federal Reserve has once again entered the "rate cut time."

1. The Federal Reserve announced a 25 basis point rate cut, lowering the federal funds rate to between 4.00% and 4.25%. This is the first rate cut by the Federal Reserve in nine months and the first rate cut since Trump's "second term" began.

After the announcement of the interest rate cut, the offshore RMB to USD exchange rate reported 7.0845, New York gold reported 3744 USD/ounce, US stocks rose slightly, and the US dollar index reported 96.22. The yield on US 10-year Treasury bonds fell below 4%.

2. The scale of this interest rate cut meets expectations, with no unexpected surprises. However, it carries a turning point significance: in the next one to one and a half years, the Federal Reserve will not only continue to cut interest rates but will do so at a relatively large scale. The interest rates in the U.S., which have soared since the "pandemic - monetary easing," will gradually return to normal, reverting to an era of low interest rates.

3. Why did the Federal Reserve cut interest rates at this time? Because the employment data in the United States is not ideal, and the unemployment rate has rebounded to 4.3%. Although the inflation rate has not yet fallen below 2%, they still decided to cut interest rates to prevent the economy from falling.

4. Trump is a real estate tycoon and naturally favors low interest rates. Currently, interest rates in the U.S. are at historical highs, with a 30-year mortgage rate reaching 6.3% (about 3% in China), which has stifled economic vitality. The current high interest rates in the U.S. are related to the high inflation caused by the large amount of money supply after the pandemic. The Federal Reserve has paused interest rate cuts for 9 months to observe whether Trump's tariff policy will stimulate inflation.

5. In the near future, U.S. interest rates will gradually fall back to pre-pandemic levels. According to Trump's vision, the U.S. benchmark interest rate should quickly drop to below 2%. The midterm elections are scheduled for November next year, and Trump is eager to achieve political results to help the Republican Party win the elections. It usually takes about a year for rate cuts to take effect, so he has been pressuring the Federal Reserve to lower interest rates.

6. The Federal Reserve has restarted interest rate cuts and may accelerate the pace, which is beneficial for global asset prices. This is also a medium to long-term positive for U.S. stocks, cryptocurrencies, and gold. It is expected that within this year, the Federal Reserve will cut interest rates at least once by 25 basis points, but it is more likely to be twice, with each cut being 25 basis points. The Federal Reserve has two more monetary policy meetings this year, one on October 28-29 and another on December 9-10 (both in Washington time).

7. The Federal Reserve's interest rate cuts have a significant impact on the cryptocurrency market. From the perspective of capital flow, interest rate cuts increase the money supply in the market and lower the risk-free interest rate. Funds that originally preferred traditional investments like dollar assets, in pursuit of higher returns, would partially flow into risk assets, making cryptocurrencies one of the potential directions for inflow. Historical data shows that during past easing cycles of the Federal Reserve, the cryptocurrency market often attracts incremental capital, driving up the prices of mainstream cryptocurrencies like Bitcoin. For instance, during the period from 2020 to 2021, the Federal Reserve significantly cut interest rates in response to the pandemic, and Bitcoin's price soared from several thousand dollars to over 60,000 dollars, reaching an all-time high.

8. After the Federal Reserve's significant interest rate cut, the interest rate inversion between China and the U.S. will ease, and China's monetary policy space will also expand. This month, China's LPR rate will be announced next Monday (September 22), and it is likely to be cut by 10 to 15 basis points. Due to the current sluggish property market, we are highly likely to lower interest rates. Even if there is no cut this month, a reduction is expected in October. Before the LPR rate cut, the central bank will lower the 7-day reverse repo rate to signal a rate cut.

9. The Hong Kong dollar is pegged to the US dollar, so the interest rate cuts for the Hong Kong dollar will remain in sync with those of the US dollar; the Chinese yuan, due to interest rate inversion, will have smaller rate cuts than the US dollar in the future. The asynchronous interest rate cuts of the Chinese yuan, US dollar, and Hong Kong dollar are beneficial for retaining funds in the mainland. In the past period, due to significant differences in deposit interest rates, there were many people exchanging currency to deposit in Hong Kong. This will decrease in the future.

10. The Federal Reserve's interest rate cut is also beneficial to the Chinese stock market, real estate market, and economy. Among them, since the interest rate cut for the Hong Kong dollar will be greater than that for the Renminbi, the benefits for the Hong Kong stock market and real estate market appear to be even more significant.

11. In the near future, the pace of interest rate cuts in the US dollar will be faster than that of the Chinese yuan, so the exchange rate of the yuan against the dollar has entered a period of slow appreciation, and trade negotiations will reinforce this trend. This year, the exchange rate of the yuan against the dollar may return to below 7, so brothers exchanging U for U should be prepared, and there will be more room for appreciation next year. The important prerequisite for appreciation is: both parties reach a trade agreement; otherwise, it will be a different story.

12. From the perspective of market risk appetite, the economic stimulus expectations brought about by interest rate cuts have increased investors' overall risk appetite. As an emerging and high-risk, high-return asset class, cryptocurrencies are more favored when investors' risk appetite increases. Investors who originally held a cautious attitude towards cryptocurrency investments may increase their allocation to cryptocurrencies due to improved economic environment expectations after the interest rate cuts. Furthermore, following the interest rate cuts, the trend of a weakening dollar is evident, while cryptocurrencies like Bitcoin are often seen as a safe-haven asset similar to "digital gold." Against the backdrop of dollar depreciation, their anti-inflation and safe-haven properties are being re-evaluated by the market, attracting more capital inflow and driving prices up, so the slow bull market has just begun!