Fed and Market Expectations Diverge,What Can We Expect From It?
Overnight, the Conference Board released a consumer confidence index of 104.2 for March, which was higher than expected and higher than the previous value of 103.4. Meanwhile, the Richmond manufacturing index was better than expected in March.
I believes that,In the stormy March of Silicon Valley banks and signature banks, consumer confidence was still stronger than expected and previous values, which shows that some institutions really took pains.
After the banking thunder crisis in the United States, the overall financial situation has relaxed. As shown in the following figure, the green line is the trend of the S&P 500 index and the black line is the Goldman Sachs American Financial Conditions Index, which show a mirror symmetrical trend.
The continuous rebound of US stocks always corresponds to the continuous relief of financial conditions.
This is true not only in America, but also in human nature, that is, easing (QE) is easy and tightening (QT) is difficult. Data show that after the financial crisis in 2008, few major central banks in the world have recovered the "water" released through quantitative easing. And In the recent banking crisis, the balance sheets of central banks in Europe and the United States expanded again, and nearly half of the quantitative tightening measures of the Federal Reserve were offset within a week The following figure shows the proportion of Treasury Bond held by central banks in GDP.
Just like this, we can see that during this round of banking crisis in Europe and America, the spot gold price started around 1810 at the beginning of this month, and hit a new high of 2010 USD/oz in just nine trading days, which also created the myth of millions of wealth for our class students.
From a purely technical point of view, at present, gold has sent out a left-left short signal near $2,000/oz, that is, overbought needs to be corrected, while the left-side short signal described , the top structure of the daily line level is written, which is expected to occur in the first half of next week with a high probability.
In view of the top structure of the daily line level, it is theoretically managed for one month, which means that throughout April, our point of view is to be bearish and short of gold. Of course, we also believe that it is only a matter of time before the gold price reaches a record high in the medium and long term.
Of course, the market believes that the Fed's monetary policy will turn loose in the second half of the year, which is a potential support for gold prices, but the Fed still insists on not cutting interest rates this year.
St. Louis Fed Chairman Brad said that financial pressure has increased in recent weeks due to the banking crisis, but thisIt can be controlled by regulatory policy instead of interest rate policy.
As shown above, Bullard introduced the financial stress index designed by the St. Louis Fed where he works. The index is 0, representing normal financial market conditions. As shown in the chart below, the index soared to above 9 during the financial crisis in October 2008 and above 5 during the COVID-19 pandemic period in March 2020, all of which were accompanied by economic recession.
Recently,The index has soared significantly again, but it is not as good as the previous two crises for the time being.
Brad is a well-known hawk among senior Fed officials. At present, when the market is strongly expected to cut interest rates, he once again speaks amazingly, saying that itThe final value of interest rate for this rate hike is expected to rise to 5.625%, compared with 5.375% in December.
Bullard stressed that inflation in the United States is still too high, and early rate hike keeps inflation expectations low. It would be a disaster to abandon the 2% inflation target.
However, at present, the market expectation seems to go to the other extreme that the Fed does not want to see, that is, the market expects the Fed to stay put in May, and then cut interest rates by 25 basis points at each interest rate meeting in June, July, September, November and December in the second half of the year, and it is necessary to cut interest rates by 100-125 basis points by the end of the year.
With such a big gap between the Fed and the market expectation, it is expected that after the next heavy fundamental event comes out, the financial market will once again experience earth-shaking fluctuations.
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