The Rate-Cut Narrative Needs a New Script

August CPI rose 0.4% month-on-month and 3.4% year-on-year. On the surface, this was fully in line with expectations, but a closer look shows core CPI rose 0.3% month-on-month, still indicating persistent inflation in the US. Meanwhile, August nonfarm payrolls were significantly stronger than market expectations, meaning the Federal Reserve is now facing not a single script of “economic recession, so rate cuts are necessary,” but rather economic resilience and inflationary pressure at the same time.
That is also why market expectations for September policy quickly turned hawkish. The latest market pricing shows that the probability of a September rate hike briefly approached 90%, with the policy focus even beginning to shift from “whether to hike” to “whether there will be further hikes this year.”
Interestingly, however, the stock market did not plunge according to the traditional script. The S&P 500 and Nasdaq instead rose by about 0.8%. This shows that investors have already priced in some of the interest-rate risk. As long as corporate earnings do not deteriorate significantly, high-valuation assets may not immediately lose support. #每周来晒 and #August CPI data released
My view is that it is not worth betting on a one-sided market in the short term; the focus should be on the interaction between the US dollar, US Treasuries, and BTC. If yields surge and then retreat, that could instead become a window for technology stocks and crypto assets to restart.