The macroeconomy is significantly reflected by the Fed, the president of Fed, CB of each country, etc. The impacts on the economy are from two parts, one is the real policy implemented, the other is the sentiments (including the expectation of policy implementation.
In the most recently Jackson Hole ended two days ago, on Friday last week 26th Aug, Powell, who is the chair of Fed, showed his forceful attitude toward inflations. His speech disclosed that inflation is still in a high level, and not a place to stop or pause.
Personal Consumption Expenditure data is about 6.3%. Although PCE is less than in March, it’s still in a very high level.
The market reacted to the speech in Jackson Hole by a significant decrease, and also Bitcoin price, as a leading factor of market sentiment, dropped about 5% to less than 2k dollar. The market would definitely have reaction based on expectation. Personally, I am not optimistic toward the world Econ. Since the beginning of 2020, helicopter drops resulted in the unprecedented growth in the US market, the QT right now would force the market go back to the beginning adjusted with fundamental growth. Let’s see what would happen in the following months.
Powell insisted that the Fed will keep the 2% inflation target, coz high inflation rate would be harmful especially to the middle class and the poor. Therefore, he stated the Fed would keep QT and rise interest rate, and another 75 basis point increase in interest rate could possibly happens depending on the macro and statistical data.
My idea is coincidentally compatible with Powell’s. Although the market has foreseen the turning point of the inflation, the inflation rate is still in an extreme high level.
The market seemingly is pricing in the expectation that inflation would be about 4% by the end of this year. `Investing in Energy and Metal Commodity might still be a good choice.
China is facing a completely different problem. Low demands and high savings damage the economic growth, and the gov still choose to stimulate the Econ through the Real Estate, which is an ineffective way in my view. Chinese gov is lower the the long-term LPR, in order to rise mortgage loan and long-term investment loan, which could boost the econ growth in long term. However, the contradiction of monetary policy between US and CN is extracting the magnitude of our monetary policy. Starting to figure out a way to boost demand and keep developing high-barrier high tech industry seems a better path.