Many people think that this drop is because of CZ, but is CZ's 4-month sentence good news or a drop? Yesterday at 3 a.m., the news came out, and I said that it would still drop. Normally, it might drop on May 1 and May 2, and then it might pull back a little on May 3. Don't think about it. The market will not be much better before the end of May. And this drop is not because of CZ, but more of the actual macro reasons. BlackRock has had 0 consecutive inflows of funds, and the US hawks have caused insufficient liquidity. Hong Kong's ETFs are still coming to take over the US market. You can see how fierce the game between institutions is. Today, US stocks, US bonds, and gold are all falling. It depends on tomorrow's data release. Although the short-term market may further trade the combination of "stagflation + high interest rates", there is no need to be overly pessimistic about the interest rate cuts and economic performance throughout 2024. At present, the probability of a full-year interest rate cut may be compressed to 25BP, but the probability of no interest rate cuts is still small. The Federal Reserve, which relies on data, is likely to turn to a hawkish attitude at the FOMC meeting in early May and lower the dot plot. However, the monthly reduction plan of quantitative tightening (QT) may still proceed as planned to prevent the market from facing sudden liquidity pressure.
At present, the market is still pricing in the narrative of "secondary inflation". The spontaneous tightening brought about by this transaction may tighten demand and suppress prices in the medium term. Therefore, we believe that there is no need to be overly pessimistic about the medium-term price level and interest rate cuts. The current one interest rate cut in the third quarter may be the baseline, and in an optimistic scenario, there may still be two interest rate cuts throughout the year.