The Fed's Rate Cut Signal Reverses, Market Sentiment Suddenly Changes

The latest Federal Reserve meeting has just concluded. The seemingly dovish 25 basis point rate cut decision was met with the "true face" on the dot plot—only one rate cut is expected before 2026. This is completely inconsistent with market previous expectations. U.S. Treasury yields then surged rapidly to 4.2%, and bearish sentiment spread instantly.

Political Pressure and the Tug-of-War Over Policy Independence

Trump subsequently issued a series of strongly worded comments, directly criticizing Fed decisions, and even mentioning the cost overruns of the Federal Reserve building renovation (about $2.5 billion), implying that if rate cut pace does not accelerate, there will be adjustments to the leadership after taking office. Powell faces obvious pressure—his term has only 5 months remaining.

This signal of political interference has a profound impact on financial markets. If the Fed's independence is compromised, the long-term bond pricing logic could be completely reshaped. Market participants generally expect that, under the combined effect of inflation expectations and risk premiums, Treasury yields are likely to continue rising, and 4.5% is not impossible.

Performance of Cryptocurrencies Amid Volatility

In this round of macro turbulence, some cryptocurrencies have shown a certain level of activity, but overall, political uncertainty and policy expectation fluctuations remain the main factors suppressing market sentiment. Investors are more concerned with: which assets can maintain relative stability in such a high-volatility environment?

When Powell officially steps down in May 2026, the bond market may usher in a new pricing node. The intertwining of political cycles and market cycles often leads to unexpected market reactions. Prior to that, a high-yield environment may persist, which will have a profound impact on risk asset allocation strategies.