To The Moon

The economic cycle has started, driving the global manufacturing cycle to restart after two years, with the risk of inflation intensifying.

From the supply side, the copper-gold-oil mega-cycle has started, the stock cycle rebound trend is confirmed, and the manufacturing cycle is confirmed to start rising.

From the demand side, the most obvious consequences are rising hourly wages and CPI exceeding expectations.

There is no longer a window for interest rate cuts in the short term.

When is the interest rates cut path?

The resilience of the U.S. fundamentals and the deep inversion of the yield curve also mean that this round does not require too many interest rate cuts. At the same time, there is no need to wait for the economy to deteriorate significantly for interest rate cuts, as the current actual interest rate is already slightly higher than the natural interest rate, and the financing costs faced by US residents and businesses are also higher than the investment return rate, which helps to a certain extent to cut interest rates.

The arrival of the real window for interest rate cuts requires a cooling of demand to drive prices weaker again.

Which comes first? Stock corrections or rate cuts?

Currently, stocks and credit bonds have not fully reflected the risk of re-inflation, assets have not significantly corrected, and commodities have shown a certain "sprint" phenomenon, including crude oil $WTI Crude Oil - main 2405(CLmain)$ , copper, cocoa, etc. $United States Oil Fund(USO)$

The Federal Reserve's dual mandate, i.e., full employment and inflation stability, if stable at this stage, indeed does not need to cut interest rates.

However, if the credit spread widens and U.S. stocks fall, it is necessary to open the window for interest rate cuts. Therefore, the postponement of short-term interest rate cuts is precisely conducive to the reopening of subsequent interest rate cut transactions.

Just need to find a suitable inflation window to cut interest rates a few times, solve the problem of yield curve inversion, and free financial conditions from restrictions.

What asset to choose ?

1. In the short term, short-term government bonds are a better choice (the probability of continued interest rate hikes is small, but interest rate cuts will not come quickly) $iShares Short Treasury Bond ETF(SHV)$ , followed by long-term government bonds (corresponding to interest rate cuts 1-2 times within the year) $iShares 20+ Year Treasury Bond ETF(TLT)$

2. During periods of inflation volatility, value often performs better than growth;

3. As the interest rate center rises, funds become more selective, relatively favoring more cost-effective assets, value stocks with stable cash flows, or high-quality growth stocks with solid profit realization capabilities, such as $NVIDIA Corp(NVDA)$ .