The Fed is now like walking on a tightrope 🎪 — afraid to cut interest rates due to potential issues, but not cutting them is even more troublesome.

Let me start with a counterintuitive fact: a rate cut is not necessarily good news.

Last November, when U.S. stocks plummeted, Fed officials collectively "gave in," and the market directly pushed the interest rate cut expectations to 90%📈. But did you notice? They just didn’t dare to really take action. Why? High interest rates are indeed putting a lot of pressure on the U.S.—those money-burning AI projects need cheap funds to survive, and employment data has also started to decline. But if they really cut rates, a bigger problem lies ahead: money will flow out due to the narrowing interest rate spread, and when that happens, who will bear the liquidity crisis?🌪️

Textbooks say that lowering interest rates stimulates the economy, but that theory is already outdated. Now, global funds are running around everywhere, chasing high returns. Just look at the high interest rates in the U.S. in recent years; the U.S. stock market and real estate prices have instead soared. In contrast, when interest rates are lowered domestically, the A-shares and Hong Kong stocks just slump, with over 1 trillion yuan fleeing to dollar assets from 2021 to now 🇺🇸. The core point is simple: whether lowering interest rates can retain money depends on whether the "printing speed" can outpace the "capital flight speed."

The Fed is now testing the market's bottom line. Not lowering interest rates? The AI bubble and the job market may collapse first; lowering them? Capital outflow could trigger a more deadly chain reaction. So they are playing with hawkish-dovish rhetoric, being tough one moment and soft the next, while hoping that the China-U.S. interest rate differential serves as a buffer (for example, the central bank suppressing the dollar-denominated Chinese bond yield). In short, controlling the rhythm is the key.

The global market is tightly bound now🔗: gold, bitcoin, and US stocks are hedged, oil affects the dollar and gold, while the AI sector connects with tech stocks, non-ferrous metals, and electricity. If the interest rate cut pace goes wrong, leveraged liquidations and panic selling can happen in a minute.

In the long term, the currency will definitely be printed more and more, but in the short term, we must guard against sudden liquidity withdrawal. When the market fluctuates, don't panic and follow the trend; first determine whether it is short-term noise or a long-term trend before acting.