The US dollar rate cut has finally triggered the butterfly effect! Will the global economic landscape change again? So, is the US dollar rate cut good or bad for us? Will our stock market really continue to rise?

This episode is extremely important and will help you avoid big pitfalls! Save it and watch it slowly. Because the US may have big moves ahead, and only by clearly understanding the real-time dynamics of the world economy can we better prepare for the future.

Let's first look at a few major events happening around the world.

Firstly, due to the aggressive interest rate hikes of the US dollar, the Federal Reserve is already suffering losses of up to 201.2 billion US dollars. In fact, as early as January of this year, the Federal Reserve announced that it had lost 114.3 billion US dollars in 2023, the highest annual loss in history. This means that the loss for the first nine months of this year has already reached the annual loss of last year. It is not surprising that the Federal Reserve's losses this year will set a new record.

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Secondly, just as we enter October, the three major US stock indexes have started to fall collectively. The S&P 500 index fell by 0.93%, the Dow Jones Industrial Average fell by 0.41%, and the Nasdaq Composite Index fell by 1.53%. In contrast, during the Golden Week of this November, the three major Hong Kong stock indexes have been strengthening collectively. Over the past two weeks, the Hang Seng Index has risen by 24.5%. It can be said that US stocks and Hong Kong stocks have formed a sharp contrast.

Furthermore, the US non-farm employment increased by 254,000 people in September, which is more than 100,000 people than the 142,000 people in August, exceeding market expectations, and the unemployment rate also fell to 4.1%. So far, the probability of the Federal Reserve cutting interest rates by 25 basis points in November has risen to 71.5%!

From these three events, it is not difficult to see that even though the US non-farm employment in September exceeded expectations, due to the huge losses of the Federal Reserve and the continuous turmoil in the stock market, the US dollar will continue to cut interest rates.

In addition, due to the US dollar rate cut, a large amount of funds in the US are accelerating outflow, especially to the Chinese market. We can see this from the sharp drop in US stocks and the sharp rise in Hong Kong stocks. It can be said that with the US dollar rate cut, Chinese assets are being continuously purchased by global capital. Now, both Morgan Stanley and HSBC have pointed out that the valuation of the A-share market is still undervalued by 15%.

Speaking of this, some netizens will definitely say, then will our country's A-shares rise sharply after the holiday! Don't worry, let's continue to look down, the next is the key.

Let's first talk about whether the continuous rate cuts of the US dollar are good or bad for us?On the surface, a reduction in U.S. interest rates seems to be beneficial for the repatriation of funds from various countries, which can in turn stimulate domestic investment and employment, and warm up the global economy. Some foreign institutions are even claiming that after the Federal Reserve lowers interest rates, there will be a trillion dollars flowing back to China! This is because the appreciation of the yuan against the dollar makes Chinese assets more attractive for investment.

However, this only holds true during normal periods of the global economy. In abnormal times, consecutive and significant reductions in U.S. interest rates indicate that the global economy is in rapid decline, and a major crisis is imminent.

Looking at historical experience, between 1988-1989, to prevent inflation following a stock market crash, the U.S. dollar raised interest rates by 331.25 basis points. Subsequently, a cycle of U.S. interest rate cuts began, and in 1991, the Japanese economy began to collapse.

Between 1994-1995, to prevent high inflation in the United States, the U.S. dollar raised interest rates by another 275 basis points, increasing from 3.25% to 6%. After that, a cycle of U.S. interest rate cuts began, and in 1997, Thailand faced a financial storm that spread to the entire Asian economy.

Between 2004-2006, to curb the bubble in the U.S. real estate market, the U.S. dollar raised interest rates by 425 basis points, increasing from 1% to 5.25%. After that, another cycle of U.S. interest rate cuts began, and in 2008, the U.S. subprime mortgage crisis hit, affecting the global economy. China even used 4 trillion yuan to rescue the U.S. economy from dire straits.

Speaking of which, from March 2022 to July 2023, the Federal Reserve has already raised interest rates 11 times in just over a year, with a total increase of 525 basis points, and has only now begun a cycle of U.S. interest rate cuts. Judging by this, two years later, around the end of 2026, either the United States itself or other countries around the world are very likely to face a new round of economic crisis. Moreover, judging by the magnitude of the U.S. interest rate hikes, the extent of the impact this time may be even greater.

So why is it said that a global economic crisis may occur two years after the U.S. dollar interest rate cuts? This is because the market effects of U.S. dollar interest rate hikes and cuts are delayed.

This means that the severe consequences of the U.S. dollar's strong interest rate hikes are slowly becoming apparent, and the interest rate cuts mark the beginning of a turning point in this matter.

Let's look at this issue from another perspective.

That is, the last thing the U.S. wants to see with U.S. dollar interest rate cuts is a large amount of capital flowing to China, thereby promoting the sustainable development of China's economy. According to data, in the first eight months of this year, our country absorbed foreign investment of more than 580 billion yuan! Moreover, this phenomenon is accelerating with the U.S. dollar interest rate cuts.So, Biden had previously stated that he would restrict American capital from entering the Chinese market and also limit Chinese capital from entering the U.S. market. It can be said that this is the result of America's zero-sum game mentality. The economic game between China and the U.S. is essentially unchangeable.

However, capital is profit-driven, as the saying goes, "When there is policy from above, there are countermeasures from below!" They will find ways to enter the Chinese market. Recently, Goldman Sachs' institutional brokerage business has set a record for the purchase of Chinese stocks since March 2021. It can be said that foreign capital is now rushing into the Chinese market.

Faced with this situation, will the U.S. completely admit defeat? What should be done next?

It can be said that the U.S. will not completely admit defeat unless it is cornered. So, how to make capital flow back voluntarily is the most perfect method. Now, the U.S. dollar cannot raise interest rates, and it is imminent to lower interest rates. The best way is to create a global economic chaos, making global capital believe that even if the U.S. dollar lowers interest rates again, U.S. dollar assets are still the safest assets in the world. In this way, wouldn't the U.S. achieve its goal?

Through the Russia-Ukraine issue, the Palestinian-Israeli issue, the Iranian-Israeli issue, and our country's South China Sea issue, we can see the true intentions of the U.S. more clearly. It can be said that the global economy is the biggest turmoil in recent decades. Of course, our country has also made it clear that a full-scale war is imminent.

From this point of view, it also verifies the viewpoint I mentioned above, that is, it is highly likely that the global economic turmoil will occur in the next two years.

But things are different now. The world is de-dollarizing, and the U.S. has become the common enemy of the world. China's economic strength and military strength are also different from the past. It can be said that the U.S. now has fewer and fewer trump cards in its hands, and whether it can continue to achieve the desired results is a big question mark.

In summary, the U.S. dollar's interest rate cut will definitely be beneficial to China's economic recovery in the short term, and the price of China's assets will also be further raised. This is also the reason why many netizens unanimously look forward to a big rise in A-shares after the holiday. However, in the long run, we still need to avoid certain market risks, especially at this critical juncture of China-U.S. economic game! Don't be intoxicated by victory.