Stock Market Frenzy: Average Profit of 47,000 Yuan per Person, Has a New "Wealth Creation Myth" Officially Begun?

A few days ago, various favorable policies were frequently introduced, and China's capital market became popular worldwide. The large A shares turned into a value lowland in the eyes of foreign capital, and they rushed to enter the market.

At such a critical moment, there is news that the Federal Reserve may urgently cut interest rates by 50BP in October.

The market is getting crazier and crazier, is the bull market really coming? Is the pace of the Federal Reserve's interest rate cuts going to be disrupted by increased US dollar capital in the Chinese market?

Today, let's talk about these issues. It's not easy to write, welcome to like, forward, and collect.

How long can the crazy market continue?

To understand how crazy this wave of the market is, let's first look at a set of data:

According to the statistics of Wind Data, in just 4 days, the market value of large A shares increased from 74.98 trillion to 84.86 trillion, with a net increase of nearly 10 trillion, and on average, each stock investor made a profit of 47,000 yuan.

The stock market soared, and the market trading sentiment was high. The Shanghai Stock Exchange experienced a historical crash, and some experts believe this is a typical phenomenon of transaction congestion.Despite the ceasefire during the current National Day holiday, it is estimated that most people have only one question in mind: will this crazy market trend continue?

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The outbreak of this market trend is partly due to the dollar's initiation of a rate-cutting cycle, with the RMB exchange rate under pressure to decrease, leaving us with ample policy space to boost market confidence and launch a counteroffensive in China's economy.

On the other hand, the higher-ups have acted decisively, not only by lowering interest rates and reserve requirements to reduce the interest rates on existing housing loans but also by allocating 800 billion yuan of "stock market special funds" and innovatively introducing two major policy tools to significantly drive up the stock market.

However, at the end of the day, the economy is the foundation of the stock market. To achieve a long-term bull market, the key is still to look at the state of the economy.

Therefore, whether China's economy can continue to improve in the future, and how much foreign capital can be mobilized by this major counteroffensive in China's economy, is the key to whether the crazy market trend can continue.

US dollar capital is rushing to enter the market.

Profit-seeking is the nature of capital, and as China's market presents significant opportunities, global capital is moving in response.

Firstly, under the weakening of the dollar due to the Federal Reserve's rate cut, the RMB is appreciating.

The offshore RMB exchange rate against the US dollar has appreciated and broken through the 7.0 mark, setting a new high in 16 months.

There may be many factors affecting the appreciation of the RMB, but one important reason is the significant appreciation of RMB assets, with a shortage of RMB in the offshore market.In other words, US dollar capital is rushing into the Chinese market, boosting the strong appreciation of the renminbi.

Secondly, major international financial institutions are openly optimistic about China's capital market.

For example, Goldman Sachs historically coined the term "tactical investment," which essentially means that they believe this time the Chinese stock market is not a short-term rebound, but a real bull market has arrived.

Goldman Sachs expert Scott Rubner, in an interview with Bloomberg, excitedly stated, "This is not just monetary easing, but a comprehensive stimulus to the economy," and loudly called for "all-in on China."

Furthermore, American hedge fund magnate David Tepper is even more optimistic about the Chinese market than Goldman Sachs.

Tepper bluntly stated that US stocks are no longer the best investment choice; the Chinese market is, and he intends to buy all renminbi assets.

Tepper is not just "talking the talk," but has indeed sold a large amount of his holdings in Nvidia stocks and turned to invest in the Chinese market, bringing real money with him.

It is evident that along with a series of economic stimulus policies, US dollar capital is frantically grabbing Chinese assets, and these driving forces for the continuous improvement of China's economy are tangible.

From this perspective, this counter-offensive in China's economy is by no means a flash in the pan; it is highly likely to be followed by a major bull market.

The Federal Reserve's interest rate cut rhythm is disrupted.China's stock market is welcoming a windfall of wealth, which may disrupt the Federal Reserve's interest rate reduction pace.

Previously, the market widely predicted that the US dollar would cut interest rates by 100 basis points this year, which means that after a 50 basis point cut in September, there would be two more interest rate meetings in November and December, each cutting by another 25 basis points.

However, recently there have been sudden rumors that the Federal Reserve may urgently cut interest rates by 50 basis points in October.

Where there's smoke, there's fire. Why is the Federal Reserve in such a hurry?

There may be mainly two reasons.

The first point is that the US economic situation may be worse than it appears, and it really can't hold on anymore.

In late August this year, the US Bureau of Labor suddenly revised down the non-farm employment numbers for the past year by 818,000 people. Although everyone knows that the US employment data has some水分, no one expected it to be an ocean.

This means that the US labor market may not be as good as it appears, and the clouds of an economic recession crisis are looming over the United States.

The second point is that the Federal Reserve knows that interest rate cuts will lead to capital outflows, but it didn't expect China to play such a quick set of small combos.

According to the original estimate, after the Federal Reserve cut interest rates, central banks from various countries would follow suit and start a wave of interest rate cuts. At that time, the US dollar would not depreciate cliff-style, and capital would not flee in a landslide, allowing the US economy to take a breather and achieve a soft landing.The script has changed:

Although the Federal Reserve has cut interest rates, everyone is essentially staying put. China even immediately rolled out its prepared plan, first announcing that the LPR would remain unchanged, followed by the introduction of strong stimulus policies, blatantly targeting the real estate and stock markets for easing.

As a result, Chinese yuan assets quickly experienced a surge, with US dollar capital rushing in without pause, pouring into the Chinese market in large amounts.

It is precisely for this reason that James Bullard, the President of the Federal Reserve Bank of St. Louis, clearly stated:

The degree of weakness in the US economy and the labor market may exceed current expectations, and a faster pace of interest rate cuts may be appropriate.

However, now whether it is an emergency rate cut by the Federal Reserve in October or following the original rhythm, the situation has become very passive. Once interest rate cuts begin, they are difficult to effectively control.