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The Federal Reserve has cut interest rates again. The third time, each by 25 basis points, bringing the federal funds rate to 3.5%-3.75%. More notably, just after stopping the balance sheet reduction, they immediately turned around to expand the balance sheet, purchasing $45 billion in short-term government bonds each month. These step-by-step operations are equivalent to directly pressing the accelerator on the global asset markets.
First, let's talk about the reaction in the US stock market. As soon as the easing policy was announced, the Dow Jones Industrial Average rose by 1.05% that day, and the S&P 500 hovered around its all-time high. Institutional forecasts predict the S&P 500 will reach 7,600-7,800 points by 2026. The technology sector is the most favored, benefiting from continuous AI industry catalysts and the liquidity fire being stoked, with dual positive factors stacking up, making tech stocks the biggest beneficiaries. Short-term bonds are also doing well, with the 2-year US Treasury yield dropping over 7 basis points to 3.54%.
However, there are risks involved. The high valuation of AI and the debt financing cycle could collapse if there are no substantial technological breakthroughs to support them. In the long term, the yield on the 10-year US Treasury cannot break 4.2%, and it is expected to fluctuate within the 4%-4.5% range.
Turning to the RMB side. The Fed's rate cut and balance sheet expansion caused the US dollar index to lose the 99 level, and the RMB against the dollar broke through 7.06, with offshore RMB reaching a new high since October 2024. At this point, foreign capital began flowing into Chinese assets. By November, foreign long positions had bought nearly $10 billion in A-shares and Hong Kong stocks combined.
Wall Street giants are generally optimistic about China's upcoming asset market. JPMorgan predicts the MSCI China Index will rise by 18% by the end of 2026, while HSBC forecasts the Hang Seng Index could reach 31,000 points. The technology growth sector is considered the most promising direction.
Tech stocks are about to soar again. When liquidity increases, these folks go crazy. The AI bubble will burst sooner or later.
The appreciation of the RMB is indeed good, but how long can it last? If the US dollar index rebounds, it will have to turn back.
I really don't believe those predictions on Wall Street. How are the targets they set last year doing now?
Whether Chinese assets can rise depends on the policy support. Just waiting for foreign capital to come in is not very realistic.
This round of market opportunities is indeed abundant, but caution is necessary. It's hard to say whether the risks outweigh the rewards.
I just want to know when AI valuations will peak. If they crash, it will be a spectacular collapse.
By the way, the RMB has broken through 7.06. Are foreign investors really starting to bottom fish in A-shares? Or is this just a short-term hype?
Even U.S. Treasuries have fallen. Friends holding these assets should take profits now; you're really at risk of being cut.
After this round of liquidity dividends, where's the next trap?
Wait, RMB appreciation and foreign capital coming in to buy A-shares? Why do I feel like this rhythm is a bit familiar... How did it go the last time we played this game?
S&P pushing to 7800? Whether there's an excuse or not, the key is having real growth support; otherwise, it's just a bubble.
Expanding the balance sheet by $45 billion in short-term government bonds—this guy really can't sit still for a moment. If the dollar depreciates, do we have a chance? I need to seriously look into how to allocate.
U.S. bond yields stuck between 4% and 4.5%, fluctuating repeatedly. There's still arbitrage space here; it all depends on who can hold out until the end.
RMB breaking 7.06 definitely attracted foreign investment, but honestly, how long can this rally last? The question is whether there's a technical breakthrough to take over.
AI with high valuations and debt financing—those still willing to take the plunge are true warriors, or maybe they've really been brainwashed.
The index is climbing to new highs, is this really a breakout or just another repeat of history? I’m increasingly skeptical of the predictions from those on Wall Street.
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The AI bubble is so big that when it bursts, it will be the end. Don't cry then.
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The RMB has broken through 7.06. This wave of foreign capital bottom-fishing in Chinese assets, I think it's feasible.
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S&P 7800 in 2026? Ha, first we need to get past the debt hurdle.
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Whenever the Fed cuts interest rates, Chinese assets rise. This logic is too obvious. Is there still room for manipulation?
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Liquidity plus AI catalysis, the tech sector indeed benefits from dual positive factors, but the ceiling is about the same.
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Short-term bond yields have fallen to 3.54%. No need to say where the funds are flowing.
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Hang Seng Index at 31,000 points? Let's stabilize the bottom first. This level is a bit risky now.
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The dollar breaking 99 and the RMB appreciating—how long will this round of foreign capital inflow into China last?
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High valuation of AI plus debt cycle, eventually the bills will come due. Those all-in on tech stocks are just waiting to be educated.