On the early morning of September 19th, at two o'clock, the Federal Reserve's interest rate cut finally took place, and it was a significant one, with a substantial reduction of 50 basis points at once, whereas the market's general expectation was that a 25 basis point cut was more likely.

After the news broke, the three major U.S. stock indices surged directly, but of course, they soon began to plunge.

It is evident that the impact of the rate cut is enormous, with the battle between bulls and bears continuously unfolding.

Since 2022, the Federal Reserve has carried out 11 interest rate hikes, aggressively increasing the rates by 525 basis points, from 0.25% to 5.5%, with the intention of bursting the global economy and using the dollar's tidal effect to siphon global funds.

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However, the result has been that no country has been burst, and it is clear that the dollar's dominance globally has significantly diminished.

The dollar is the world's currency, accounting for more than 47% of global trade payments, and an even higher percentage in financial payments.

In theory, the Federal Reserve's rate cut means reducing the interest rate advantage of the dollar, which will lead to capital flowing from the U.S. market to other countries with higher-yielding assets.

This capital outflow will put pressure on the dollar's exchange rate, and with more dollars circulating in the market, it will lead to the devaluation of the dollar.

From today's market news, the two most obvious benefits of the Federal Reserve's rate cut are: the first is digital currencies, with six of the top ten digital currencies increasing by more than 2%.

Some digital currencies with smaller market capitalizations have seen increases of more than tenfold.

Affected by this, domestic digital currency concepts have also fluctuated and strengthened, with an increase of 2%.

The trend of digital currencies and gold is exactly the opposite of the dollar; when the dollar cuts rates, it is the time for them to rise.

Before the emergence of digital currencies, gold, as a scarce resource, had a more prominent ability to combat inflation.

In recent years, digital currencies have clearly diverted the risk-avoiding function of gold because their money laundering capabilities are more powerful.

The second is Japanese assets; on the first day of the rate cut, the Nikkei index had the largest increase in Asian stock markets, once exceeding 2.7%.

The U.S. dollar cuts rates, but the three major U.S. stock indices are on a rollercoaster; why does the Nikkei index rise?

The reason is that the Federal Reserve started a new round of rate cuts in a surprise manner, with 54% of investors expecting only a 25 basis point cut, and even 21% thinking there would be no rate cut, but the result was a direct cut of 50 basis points.

To be honest, 50 basis points is not much, but the signal is quite strong, exceeding market expectations, causing some U.S. stock investors to worry that the Federal Reserve has seen some worse data, such as the U.S. Bureau of Labor Statistics' one-time reduction of non-farm employment by 818,000 people within December on August 12th, and in July, the number of layoffs in the U.S. increased to 1.76 million, the highest level since March 2023...

This has made everyone realize that the U.S., as strong as it is, is only a facade, that is, the U.S.'s current high blood pressure condition may be more serious than what the outside world sees, which is to say they admit that they are in an economic crisis.

This is the fundamental reason for the U.S. stock market's rise and fall, and some funds have started to withdraw.

The dollar cuts rates, the yen raises rates, and international hot money will naturally flow into Japan for risk aversion in the short term.

In short, the Nikkei index has risen due to the increase in market risk aversion.

Of course, rate cuts are cyclical events, and in the early stages, most funds are still in a wait-and-see state, so the change in the world pattern is not a matter of a day or two, and further observation is needed.

As expected, when we look at the U.S. stock market today (9.20), it is another scene, with the three major U.S. stock indices all rising, and the S&P 500 and Dow Jones both hitting new historical highs.

Moreover, we should not think too simply about the U.S.; personally, I believe there is a more important reason for the Federal Reserve's substantial rate cut this time, which is that since raising rates cannot burst any country, then try to let the dollar flow to the world, forcing all countries and institutions with dollars to help the U.S. Treasury dilute the debt pressure together, and the fundamental purpose is to ensure that the dollar hegemony system returns to normal operation.

Next, let's talk about the impact of the Federal Reserve's rate cut on China's economy.

As everyone knows, the last time the Federal Reserve cut rates was in 2020, and this time the rate cut not only led to a relaxation of credit in China but also indirectly led to an explosion in housing prices.

So will history repeat itself this time?

China's real estate newspaper bluntly interprets this as a "major good news."

Some media experts also believe that the U.S. dollar's rate cut is a good thing that is about to happen, and trillions of dollars will flow back to China next, and they are urging everyone to buy houses again.

Of course, it is good news, but it is definitely not a good news of "clear skies after rain."

First of all, the Federal Reserve's rate cut is beneficial to China's real estate market, on the one hand, it is the inflow of overseas funds, and on the other hand, after the Federal Reserve's rate cut, the monetary policies of China and the U.S. have begun to synchronize, greatly reducing China's rate cut pressure.

With the arrival of the era of global monetary easing, China's monetary policy has more room for maneuver, and it may use a variety of means such as reducing LPR rates, reducing existing mortgage rates, and lowering reserves to boost the real estate market.

In the past few years, there has been a rare inversion of interest rates between China and the U.S., with China's 10-year government bond yield being about 200 basis points lower than that of the U.S. To reduce the outflow of funds from China, China's rate cuts have been very small.

After the dollar started the rate cut cycle, theoretically speaking, China's room for rate cuts in the next few years has increased.

Some people may ask, is a new round of money printing coming?

We cannot be sure how much the next rate cut will be, nor can we be sure when it will happen, the only certainty is that interest rates will definitely fall.

I wrote this article on 9.19, and the reason I only published it today is that I wanted to see the attitude of our central bank, because today is the date when the September LPR quote is released, which is the first time to verify whether China will release water, and the result disappointed many people.

The September one-year and five-year loan market quote rates remained unchanged.

Why didn't we follow the Federal Reserve's footsteps and cut rates synchronously?

I personally think there are two main reasons, one is to prove to the world that our monetary policy is independent and does not look at anyone's face.

Yesterday, many central banks followed the Federal Reserve's rate cut, including Kuwait cutting rates by 25 basis points, Bahrain cutting by 50 basis points, the UAE cutting by 50 basis points, and Qatar cutting by 55 basis points.

The second is to leave room for reducing existing mortgage rates and lowering reserves.

Everyone can look at the subsequent direction, and there is no need to wait too long, at most one or two months, and these things will all be revealed.

According to convention, there may be a big move on 9.30, which is worth looking forward to.

To be fair, even if the interest rates and reserves are reduced in the future, I personally do not believe that housing prices will rise sharply.

The reasons have been said many times, mainly due to internal factors.

First, the housing prices in many cities have risen by overdrawing the city's future, which is already seriously inflated; second, population growth and industrial agglomeration are the core factors supporting the rise in housing prices, and these conditions are not currently available; third, economic recovery is the support for the rise in housing prices in key cities, and the current situation is very special, consumers have already carried a lot of debt, which means that the past practice of lowering interest rates, guiding residents to borrow, increasing the level of household debt, and promoting economic growth may not be effective.

So, whether to buy a house now, I personally think everyone should wait and see for a while.

The next is the exchange rate.

Lowering interest rates will increase the devaluation pressure of the dollar, which is conducive to the stability of the RMB exchange rate, and today (9.19) it has rebounded to around 7.06.

Can the RMB appreciate into the 6s?

I personally think there is no sustained appreciation momentum at present.

On the one hand, the interest rate difference between China and the U.S. still exists.

Even if the U.S. drops to 4.4% by the end of the year, it is still higher than our current two points or so, and the market will soon realize this; on the other hand, the economy is weak, and the appreciation of the RMB will increase the difficulty of exports.

The appreciation of the RMB suppresses exports, which will lead other countries to purchase goods in Southeast Asia and India, weakening our export competitiveness.

So when the U.S. cuts interest rates, China should cut interest rates even more, to continue to attack the global market with low prices and grab orders from other countries.

Many people say that the Federal Reserve's rate cut has nothing to do with ordinary people, which is wrong.

Financial stability and economic cycles are related to everyone's fate.

Although ordinary people do not look at the trend of macroeconomics, they should look at their own income, assets, liabilities, and living costs.

The Federal Reserve is the central bank of the world, and its rate cuts and hikes will affect the monetary direction of central banks around the world, changing the exchange rates and export situations of various countries.

These changes will eventually be transmitted to the daily lives of ordinary people.

In theory, the global start of the rate cut tide is beneficial to the export of manufacturing countries.

Next, whether China's exports will explode, let's wait and see.

Moreover, in terms of investment, many people are saying that the Federal Reserve's rate cut is conducive to accelerating investment in China.

Looking at the flow of the stock market, there was indeed a return of funds to China yesterday, but mainly in the consumer sector, such as liquor, food, beverages, home appliances, etc.

The liquidity of the stock market is strong, and conclusions should not be rushed, because it is uncertain whether it will fall back in the next few days.

What I really want to say is that even if the U.S. cuts interest rates and the dollar depreciates, it does not mean that the dollar will flow back to China on a large scale.

Because for funds to enter China, what is needed first is a suitable investment target.

Of course, we should also see that in fact, before the Federal Reserve cut interest rates, our decision-makers had already been laying out the industry.

Looking back at the recent measures announced by the State Council to open up foreign investment in the life and medical fields, to study measures to promote the development of venture capital, and to release the "Special Administrative Measures for Foreign Investment Access (Negative List) (2024 Edition)," which canceled the last two items in the manufacturing sector, are all preemptive layouts by the country.

The overall trend is a comprehensive, wide-ranging, and multi-channel opening up, opening up service trade, financial openness, and even the education, health, and cultural industries that the government manages more strictly have also been appropriately opened up.Investing, in essence, is about buying before an uptrend, selling during the rise, and escaping before a downturn.

When everyone anticipates that asset prices will rise after an interest rate cut, acting only after the cut has actually occurred is already too late.

To sum up, the Federal Reserve's interest rate cut decisions have complex impacts on China's economy, presenting both opportunities and challenges.

China needs to closely monitor changes in the global economic situation and flexibly adjust its own economic policies to deal with potential impacts.