To The Moon

I. Performance and Valuation of Global Equity Indices

Data Source: Bloomberg, Complied by Tiger Brokers

II. Key Market Themes

i. Fed Cuts Rates as Expected, Powell’s Hawkish Comments Rattle Markets: Is the Stock Market Peaking Again?

• Last week, the Federal Reserve's FOMC announced a 25 basis point rate cut, lowering the benchmark rate to 4.25%-4.5%. However, the accompanying statements were notably hawkish, with the Cleveland Fed President voting against the decision. Powell also publicly stated, “The current rate policy is no longer as restrictive, and future adjustments will be more cautious.” This aligns with our earlier assessment that the Fed would pause further rate cuts after this one.

• The dot plot also reflects a more hawkish stance, with three officials suggesting that the Fed should have paused rate cuts this time. Three months ago, most officials anticipated the 2025 benchmark rate to drop below 3.5%. Now, over 70% believe that rate cuts in 2024 will not exceed two, with the final rate hovering around 4%. The reasons are evident: robust Q4 U.S. economic and employment data and the stubbornness of inflation on its “final mile” toward 2%.

Data Source: Bloomberg

• Economic forecasts reveal similar trends. On the one hand, officials significantly raised GDP growth projections for 2024/2025 while lowering unemployment rate expectations. On the other hand, they increased PCE inflation forecasts for this year and the next. Fortunately, long-term growth and inflation expectations remain unchanged. This triggered a broad sell-off in U.S. equities on Wednesday, with the Nasdaq dropping over 3% in a single day. Investors are now questioning whether the bull market in U.S. stocks is nearing its end.

• We believe the FOMC’s tone was in line with market expectations. Fed insider Nick had already signaled similar positions in the days leading up to the meeting. The panic stemmed from Powell’s lack of clear guidance. While the Fed remains “data-dependent,” Powell appeared less confident under the shadow of the incoming Trump administration compared to his earlier composure. Nonetheless, short-term sharp corrections can be beneficial by releasing risks and setting the stage for future growth.

Data Source: federalreserve.gov

• Interestingly, two days after the FOMC meeting, the U.S. released November’s PCE data. Core PCE rose by just 0.1% month-over-month, below the prior reading and better than expected. Simultaneously, personal income and spending growth both slowed and came in below forecasts. It seems everything is back under the Fed’s control.

• In light of this, we view Wednesday’s market drop as primarily a release of pent-up emotions, unlikely to trigger a widespread crash. Our analysis of the past 40 years of data shows that Nasdaq 100 $纳斯达克100指数(NDX)$ corrections of this magnitude (3%-5%) are relatively rare, occurring only about 3% of the time. More importantly, these corrections are often followed by significant upward movements, with considerable gains thereafter.

Data Source: Bloomberg, Complied by Tiger Brokers

Disclaimer

1. The information contained in this document is for reference only and does not constitute any financial advice or a transaction offer, solicitation, suggestion, recommendation or any guarantee for any financial product, strategy or service. You should make your own investment decisions and bear the risk of investment responsibility independently.

2. The content of this document is based on reliable data sources that the staff believed to be reliable at the time of production. The Tiger Investment Research team may adjust without prior notice. The Tiger Investment Research team does not guarantee the accuracy, reliability or completeness of the content of this document, and does not assume any responsibility for any transactions arising from the content of this article and its derivative consequences.

3. This document is confidential and non-public and can only be accessed by professionals with corresponding risk-taking capabilities and preferences. Without the prior consent of Tiger, no one may copy or distribute it in any form.