The US market is fogged: An in-depth analysis of manufacturing fire, interest rate cut mania and economic worries

In this era of rapid change in financial markets, every slight fluctuation in data is enough to tug at the heartstrings of countless investors. Recently, a series of developments in the US financial markets have once again become the focus of global attention, especially the unexpected surge of the New York Fed manufacturing index in September and the market's enthusiastic expectations of the Fed's interest rate cut, which have mixed together to paint a complex and contradictory economic picture. However, from the economic perspective of in-depth analysis of these phenomena, it is not difficult to find that there are many hidden worries and unreasonable, worthy of our profound criticism and reflection.

The surge in the New York Fed manufacturing index in September, at first glance, seems to be a signal of a strong recovery in the US economy, but in fact, this data may be only a temporary "false fire". As a core component of the real economy, the performance of the manufacturing industry can often directly reflect the fundamentals of the economy. However, a single month's surge in the manufacturing index does not give a full picture of the overall state of the economy, much less a direct basis for the Federal Reserve to adjust monetary policy.

First, the volatility of the manufacturing index is influenced by a variety of factors, including seasonal adjustments, supply chain disruptions, and short-term order fluctuations. These factors can lead to temporary deviations in the data, which can mislead the market. Second, the US economy is still facing many challenges, such as rising inflation pressure, weak consumption growth, and uncertainty in the international trade environment. These deep-seated problems cannot be solved overnight, nor can they be masked by one or two months of manufacturing data.

Therefore, it is necessary to be cautious about the surge in the manufacturing index and avoid over-interpretation and blind optimism. At the same time, investors should also be wary of speculation in the market, so as not to be confused by short-term data fluctuations.

The surge in the manufacturing index has been matched by an unprecedented frenzy in market expectations of a Fed rate cut. Traders are betting that the Fed will cut rates by 50 basis points in September, an expectation that is even supported by a high probability from the CME's Fed Watch tool. However, behind this irrational expectation lies the market's misunderstanding and misjudgment of the Federal Reserve's monetary policy.

The Fed's monetary policy adjustments are not based on a single economic indicator or market expectations, but on a combination of economic growth, employment, inflation and other factors. Therefore, it is obviously illogical to conclude that the Fed will cut interest rates aggressively based on short-term fluctuations in the manufacturing index.

Second, the Fed has shown caution in previous monetary policy adjustments. Despite repeated calls for a rate cut to stimulate the economy, the Fed implemented only a quarter-point cut in July, well below market expectations. This shows that the Federal Reserve pays more attention to balance and stability in the adjustment of monetary policy, and will not be easily swayed by market public opinion.

In addition, we should also see that interest rate cuts are not the master key to solving all economic problems. In the current context of rising inflationary pressure, excessive interest rate cuts may further exacerbate the inflation problem, and even trigger risks such as economic overheating and asset bubbles. Therefore, the market's fanatical expectations of interest rate cuts clearly lack rational and comprehensive consideration.

The decline in the US dollar index and the rise in gold prices seem to be a direct reaction of the market to the expectation of interest rate cuts, but in fact they reflect the uncertainty of the global economy and investors' pursuit of safe haven assets. As the "anchor" of the international monetary system, the trend of the dollar index often reflects the fundamentals of the global economy. However, the recent weakness in the dollar index is not entirely driven by interest rate cut expectations, but by a combination of factors.

On the one hand, the pace of global economic recovery is not consistent, and some countries and regions are still facing downward economic pressure. This economic divergence has led to a decline in investor confidence in the dollar, which in turn has driven down the dollar index. On the other hand, the uncertainty of the international trade environment has also intensified the risk aversion of investors, prompting them to turn to safe-haven assets such as gold to seek asset preservation.

However, the spread of risk aversion is not conducive to the stability and development of the global economy. It may lead to risks such as the instability of capital flows, the volatility of exchange rate markets, and the volatility of financial markets. Therefore, we need to guard against the excessive spread of risk aversion and take measures to strengthen coordination and cooperation in the global economy to jointly address the challenges brought about by economic uncertainties.

The rise in the crude oil market has also been driven by expectations of lower interest rates. However, this rise is not entirely based on improving economic fundamentals, but has been influenced by a combination of market sentiment and speculation. As the "barometer" of the energy market, the trend of the crude oil market often reflects the demand situation of the global economy and the tightness of energy supply. However, in the context of the current weak global economic recovery, the rise of the crude oil market clearly lacks a solid economic foundation.

In addition, the complexity of the oil market is also reflected in the impact of geopolitics, climate change and other factors. These factors can lead to sharp fluctuations and increased uncertainty in crude oil prices. Therefore, investors need to be cautious when participating in the crude oil market, fully evaluate various risk factors and do a good job of risk management.

The performance of U.S. stock markets is also worrying. While major indexes such as the Dow, NASDAQ and S&P 500 have opened higher and bottomed out in anticipation of rate cuts, there is a significant risk of bubbles lurking behind this exuberance.

First, valuations in the U.S. stock market are already at historic highs. Many tech and growth stocks are trading at multiples well above what their fundamentals warrant. This high valuation phenomenon not only increases the market's vulnerability, but also increases the risk for investors.

Second, the prosperity of the US stock market depends to a large extent on the loose monetary policy and abundant liquidity. However, with the gradual tightening of monetary policy by the Federal Reserve and the reduction of liquidity, the boom in the US stock market could quickly burst. At that time, investors will face huge capital losses and risk exposure.

Therefore, we need to keep a clear understanding and vigilant attitude towards the prosperity of the US stock market. When investors participate in the US stock market, they need to fully evaluate their own risk tolerance and investment objectives, and take corresponding risk management measures to avoid potential risks.

In the face of complex economic conditions and market expectations, the Fed is facing an unprecedented dilemma. On the one hand, interest rate cuts can stimulate economic growth and ease market pressure; On the other hand, cutting interest rates could also exacerbate the inflation problem and trigger risks of overheating. As a result, the Federal Reserve needs to consider various factors more carefully and in a balanced manner when making monetary policy adjustments.

However, the Fed's monetary policy adjustments are not isolated acts, but are influenced by a variety of factors such as the global economic situation and market expectations. In this context, the Federal Reserve needs to strengthen monetary policy coordination and cooperation with other countries and regions to jointly address the challenges and uncertainties facing the global economy.

At the same time, the Federal Reserve also needs to strengthen communication and exchange with the market, timely transmission of monetary policy information and intentions, in order to stabilize market expectations and reduce market volatility. Only in this way can the Fed maintain the independence and effectiveness of monetary policy in a complex and changing economic environment, and make positive contributions to the stability and development of the global economy.

To sum up, the current phenomena and expectations in the financial market are full of complexity and uncertainty. In the face of these phenomena and expectations, investors need to maintain a calm and rational attitude, fully analyze the market situation and risk factors, and take corresponding risk management measures to avoid potential risks.

At the same time, we also need to recognize the negative impact of speculation and irrational expectations in financial markets. Only by strengthening market supervision and investor education and improving market transparency and fairness can we promote the healthy development and stable operation of the financial market.

Finally, we need to emphasize that the Fed's monetary policy adjustments are not a master key to solving all economic problems. In addressing economic challenges, we need to adopt comprehensive policy measures and coordinated and cooperative approaches to jointly promote global economic stability and development. Only in this way can we remain invincible in this rapidly changing financial market.