Latest Trends in Global Macroeconomics and Encryption Asset Markets

The interest rate cut cycle may have begun, and the Federal Reserve remains cautious.

Despite the Federal Reserve still assessing the timing for interest rate cuts, a global easing cycle seems to have begun. At the recent monetary policy committee meeting, the Fed maintained its target interest rate range of 5.25% to 5.50% and plans to slow down quantitative tightening starting in June. The market widely anticipates that there will be an interest rate cut action in September this year or before the end of the year.

Federal Reserve Governor Christopher Waller recently stated that with the job market remaining strong, it would take 3-5 months of good inflation data to consider a rate cut by the end of the year. This statement provides the market with clearer guidance. Currently, U.S. inflation and employment data still show economic resilience, and both manufacturing and services PMIs have also rebounded, so the Federal Reserve continues to maintain a cautious stance.

However, some signs indicate that a rate cut cycle is imminent. The Federal Reserve is considering easing capital requirements for large banks, which is viewed as one of the precursors to a rate cut. Globally, several major central banks have already started cutting rates, and Nomura Securities expects more central banks to follow suit in the near future. In this larger trend, a rate cut in the United States seems unavoidable.

Technology stocks lead US markets higher, interest rate cuts may change market style

NVIDIA's latest financial report significantly exceeded market expectations, with both revenue and profit hitting all-time highs. This drove its stock price up sharply, with a market capitalization that briefly surpassed $2.6 trillion, making it the third largest company by market value in the U.S. stock market. However, during the same period, other tech giants saw their stock prices generally decline, highlighting the market's enthusiasm for AI-related stocks.

In fact, the recent gains in the US stock market are mainly coming from AI-related sectors. Excluding these companies, the overall performance of the US stock market is not outstanding. This excessive concentration may bring risks, and once the AI craze fades, it could trigger a significant market correction.

However, the upcoming interest rate cut cycle may change this situation. Rate cuts often enhance market liquidity and risk appetite, which is expected to bring opportunities to the non-AI sectors that have underperformed in the long term. Therefore, the investment style in the US stock market may undergo a transformation.

Encryption assets continue to benefit, Ethereum ETF is on the horizon.

The cryptocurrency market experienced a strong rebound in May, with Bitcoin surpassing $71,000 and Ethereum briefly approaching $4,000. This surge was largely driven by expectations of Ethereum ETF approval.

The U.S. Securities and Exchange Commission (SEC) has approved the 19b-4 filing for the Ethereum ETF, laying the groundwork for its listing. Although the S-1 filing has not yet been approved, the market generally believes it is just a matter of time. Meanwhile, the U.S. House of Representatives has passed the FIT21 bill, providing clearer guidance for the regulatory framework for digital assets.

Political factors are also driving the development of encryption assets. Some Democratic lawmakers have begun to oppose the SEC's excessive interference in the encryption industry, while Republicans are vocally supporting the future development of cryptocurrency in the United States. This bipartisan shift in attitude may accelerate the compliance process for encryption assets.

Outlook

Global monetary policies are gradually shifting towards easing. Investors should closely monitor the movements of central banks in various countries and seek opportunities in interest-sensitive assets. The technology sector, especially in AI-related fields, continues to show strong growth momentum and deserves ongoing attention. The encryption currency industry is gradually moving towards compliance, bringing new opportunities for investors. However, while seizing these opportunities, one should also be wary of potential risks and maintain a cautious and diversified investment strategy.