At present, it is a recession, and Earning determines everything. The market has shifted its focus from inflation caused by economic overheating to recession caused by excessive tightening. The former's logic for economic data is that good news is bad news, and the focus of the month's direction is CPI&FOMC, while the latter emphasizes that good news is good news, and the focus is on non-agricultural data. Non-agricultural data is not good, consumption is weak, the revenue of listed companies is lower than expected, and stocks fall. The bear market has reached the final script. Recession must be rescued, and the most likely thing is to substantially abandon the 2% inflation target and accept a 3% direct interest rate cut to save the economy. Because 7-3 is easy, 3-2 is very difficult. There is a high probability that the interest rate will be raised by 25-50% at the meeting on February 1 next year, and the interest rate will approach 5%; there is a high probability that the interest rate hike will be suspended or delayed on March 22. It can be foreseen that after March 22, all assets will have a rebound. It should start with NASDAQ, and the bottom of technology stocks will be bought first. There is no meeting in April, and there are dovish expectations in May, so there will be a wave of medium-term bulls; in 2024, interest rates will be cut and water will be released to save the market, and there will be a big bull. The reason why the Fed's interest rate hike in 2022 has such a big impact is that the interest rate starts from 0. From 0 to 1, the impact on the market may be greater than 2 to 5. We can also see that the market performance is indeed the case. Because total active liquidity is related to the inverse of interest rates, and the inverse of 0 is infinity (to be precise, the effective FFR at that time was 0.08%). Next year, it will only increase from 4.5 to 5.5. Although both are 100 bp (at most), the impact is incomparable to this year. We can also use the new M2 as evidence: in 2017, the stock market rose despite the interest rate hike because the new M2 was increasing, but in 2022 it was a net loss. This year's decline is due to monetary policy driving market behavior, because corporate earnings are actually very good this year. If corporate earnings get worse next year, it will really undermine this confidence. A major factor in the good corporate earnings this year is that inflation has caused prices to rise, not that sales themselves are very strong. With the price cuts of commodities since this summer, inflation will temporarily pick up next year, which will in turn cause earnings to fall.
Written by: blockinfinity.fund Wesley
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Disclaimer: This article only represents personal investment opinions. The digital currency market is extremely risky, so be cautious when entering the market.
