The Federal Reserve's interest rate hikes and cuts trigger a chain reaction across the entire market (trading version, concise insights, directly aligned with the charts)

Core essence: Federal Reserve interest rate = global risk-free dollar cost, rate hike = global liquidity withdrawal, rate cut = global liquidity injection. All asset price movements revolve around three main lines: US bond yields, dollar strength or weakness, and capital flows. The most critical trading rule is "buy the expectations, sell the facts."

1. Federal Reserve announces 【Rate Hike】 (braking, suppress inflation, cool overheating economy)

1. US Treasuries & US Dollar (leading indicators, source of all market signals)

• US bond yields soar, saving and buying US bonds become more profitable, global capital flows back to the US (dollar siphoning)

• US Dollar Index strengthens, non-US currencies like RMB, Euro, Yen generally depreciate

• Old bonds' prices decline across the board (new bonds offer higher interest, old bonds become less desirable)

2. Performance of major trading instruments

Stocks

• US stocks: Growth stocks (tech, AI, semiconductors) plummet, value stocks and high-dividend stocks resist declines; growth stocks rely on future profits, higher discount rates directly shrink valuations; banks benefit, net interest margin widens, earning more interest

• A-shares: Northbound funds likely to flow out, foreign capital heavy positions in favored sectors face pressure; export manufacturing benefits (RMB depreciation boosts overseas order competitiveness, USD remittance profits increase); import raw material companies face rising costs, negative impact

Commodities (priced in USD)

• Gold: Short-term negative, USD strengthening + risk-free yield rising, funds abandon gold’s safe-haven attribute; only during recession fears does gold rise countertrend

• Crude oil, industrial metals: Demand expectations weaken, prices face medium- to long-term pressure; geopolitical conflicts may disrupt logic

Forex

Spot currencies: USD rises, EUR, GBP, JPY all decline; offshore RMB may break below levels and depreciate

3. Global macro risks

Emerging market external debt pressure explodes (many countries borrow USD, repayment costs surge), prone to capital outflows and currency crashes. Historically, many emerging market crises stem from aggressive rate hikes.

2. Federal Reserve announces 【Rate Cut】 (accelerating, stimulating economy, counteracting recession)

1. US Treasuries & US Dollar

• US bond yields decline, USD deposit attractiveness diminishes, USD capital flows out of the US into emerging markets globally

• USD weakens, RMB and other non-US currencies appreciate

2. Performance of major trading instruments

Stocks

• US stocks: Growth sectors show the greatest resilience, tech, computing power, small caps see strongest valuation recovery, main theme of a rate-cut bull market

• A-shares: Northbound funds flow back, foreign capital heavily invests in growth stocks and consumer sectors; RMB appreciation hurts export stocks but benefits sectors like airlines and paper manufacturing with higher import costs

Commodities

• Gold: Strongest positive, risk-free interest drops, gold’s hedging attribute maximized, initiating medium-term bull trend

• Oil, copper, chemicals: Liquidity floods in + economic recovery expectations, commodities tend to trend upward

Forex: USD depreciates, non-US currencies collectively strengthen

3. Macro impacts

Global liquidity floods, stocks and real estate markets may generate asset bubbles, with hidden inflation risks accumulating over time.

3. Essential trading rule: Buy the expectations, sell the facts (80% of traders fall into this trap)

Market often completes its move 1-3 months in advance, and when it hits the ground, it often reverses:

1. Market anticipates rate hikes → USD and US bonds rise early, stocks and commodities fall early; when the hike officially occurs, the negative impact is exhausted, and a rebound follows

2. Market bets on rate cuts early → growth stocks, gold, commodities rise early; on the day of official rate cut announcement, positive effects are already priced in, and funds rush out, causing a sharp drop

Two additional key variables: shrinking balance sheet QT (withdrawal of liquidity), expanding QE (injection of liquidity)
Rate cut + shrinking balance sheet: short-term rates fall, long-term liquidity tightens, market diverges; rate hike + stopping QT: easing intensifies, negative impact diminishes

4. Simplified quick memorization: (use as a cheat sheet for trading)

Rate hike: USD strong, US bonds rise, growth stocks fall, gold weak, exports win
Rate cut: USD weak, US bonds fall, growth stocks soar, gold bullish, imports benefit
Market reacts to expectations; when expectations are fully priced in, a reversal often occurs