The Federal Reserve signals easing, igniting rate cut expectations, and the global markets usher in a rebound wave

US stocks rise across the board, cryptocurrencies rebound accordingly

On Friday (November 21), dovish remarks from Federal Reserve officials injected confidence into the market, with the three major US stock indices all rising: the Dow up 1.08%, the S&P 500 up 0.98%, and the Nasdaq rebounding 0.88%. Driven by market sentiment, Bitcoin faced downward pressure at times, but as rate cut expectations increased, Bitcoin recovered most of its losses, currently trading around $87,680. Ethereum performed relatively weakly, dropping over 3.8% to $2,950.

Fed officials signal rate cuts, market bets on a December cut

Federal Reserve Board Vice Chair John Williams, during a speech on Friday, indicated that due to softening labor markets, the Fed still has room to cut rates again in the near future. He emphasized that while inflation must be brought back to the 2% target, it should be achieved without causing greater harm to the labor market. Williams’ comments directly suggest that the Federal Reserve meeting on December 9-10 may again cut rates.

Fed Vice Chair Jeffrey clarified concerns about an AI bubble, stating that the current surge in AI companies is unlikely to repeat the internet bubble burst of the late 1990s, mainly because today’s AI firms are more mature, have real profitability, and do not heavily rely on debt financing.

Data postponements shift market expectations

The US Bureau of Labor Statistics announced the cancellation of the October Consumer Price Index (CPI) scheduled for release on November 7, and both the November CPI and non-farm payroll reports have been rescheduled to after the Fed meeting, set for December 18 and December 16 respectively. This arrangement indicates that, lacking key economic data, market bets on a December rate cut by the Fed have surged to over 50%.

As a result, the VIX fear index fell 11.32%, reflecting a significant improvement in market risk sentiment. Gold hovered around $4,064. The 10-year US Treasury yield dipped to 4.06%, reflecting expectations of rate cuts.

Crypto funds face large redemption pressures

US banks cited EPFR Global data showing that in the week ending November 19, crypto funds experienced outflows of $2.2 billion, the largest redemption on record. This data reflects cautious attitudes among institutional investors toward the crypto market.

Stock performance diverges, tech stocks lead gains

In popular stocks, NVIDIA fell 4.3% intraday but closed down 1%; Oracle dropped 5.7%; Tesla declined 1.05%. In contrast, Google rose over 3%, Apple gained 1.97%, and Merck increased 2.9%. The China Golden Dragon Index rebounded 1.23%.

Consumer confidence hits historic lows

Data from the University of Michigan showed that the final November consumer confidence index fell to 51, a record low. The current conditions index dropped 7.5 points to 51.1, setting a new record. Consumers’ expectations for personal financial conditions even fell to the lowest since 2009.

Survey director Joanne Hsu said consumers are frustrated with persistent high prices and shrinking incomes. In the first half of November, record government shutdowns further dampened consumer confidence, disrupting food assistance and airline travel, and affecting federal employee pay. Although inflation expectations for the next year fell to 4.5%, Americans remain anxious about living costs and job security, with personal unemployment probabilities rising to the highest since July 2020.

Bank of Japan prepares for rate hikes

Bank of Japan policy board member Amamiya indicated that the central bank is close to making a rate hike decision and will not wait until next spring’s wage negotiations. With the policy rate at 0.5%, below the neutral level, and real borrowing costs after inflation remaining negative, raising rates has become an urgent task.

The Japanese Cabinet simultaneously approved a ¥21.3 trillion stimulus package, covering price subsidies and investments in key sectors. Economists have questioned this plan, warning that stimulating demand in an inflationary environment could further push up prices.

Trump administration considers adjusting China tech policies

Reuters reported that, as US-China relations ease, the Trump administration is considering approving the sale of Nvidia H200 AI chips to China. The Commerce Department is reviewing related restrictions, emphasizing that plans may change. This suggests a potentially more friendly US policy toward China.

Global market overview

European stocks showed mixed performance: Germany’s DAX 30 down 0.8%, France’s CAC 40 up 0.02%, UK’s FTSE 100 up 0.13%. Commodities: gold fell 0.29% to $4,064 per ounce; WTI crude oil down 1.33% to $57.9 per barrel. In the forex market, the US dollar index fell 0.02% to 100.2, USD/JPY declined 0.67%.

Investment insights

Dovish remarks from Fed officials reignited expectations of rate cuts, providing momentum for stocks and crypto assets to rebound. However, consumer confidence hitting historic lows reflects underlying weakness in the real economy, creating a conflicting outlook that will be a key focus for future markets. Investors should closely monitor the actual December Fed decision and upcoming key economic data releases.