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"US Stocks Plunge 500 Points Amid Global Market Surge"
01, Interest Rate Hikes
The Federal Reserve's consecutive and substantial interest rate hikes will ultimately harm itself, including the U.S. economy, the U.S. financial markets, and ordinary American families, all of which will be affected without exception.
The market has now entered the Federal Reserve's interest rate decision-making period. Data models show that the probability of the Federal Reserve making a decision to raise interest rates by 75 basis points has reached 84.1%, and the probability of a cumulative increase of more than 125 basis points in November and December has reached 93.6%. This means that after raising interest rates by 75 basis points this month, the minimum increase next month will be at least 50 basis points.
Due to the Federal Reserve's continuous interest rate hikes, global financial markets have suffered this year.
Firstly, the high inflation globally in recent years is a result of the United States' actions.
The Federal Reserve is accustomed to using the method of excessive money issuance to avoid economic recession. Therefore, after the COVID-19 pandemic, the U.S. once again issued a large amount of debt, which was purchased by the Federal Reserve, effectively flooding the market with an excessive amount of money. This has led to high inflation in most countries around the world.
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Secondly, it is now the U.S. monetary tightening policy that has forced countries around the world to follow suit with interest rate hikes, resulting in economic downturns.
02, Global Upturn
However, looking at the performance of global financial markets yesterday, it seems that in this round of interest rate hikes, other countries are gradually recovering, while the U.S. continues to decline.
Yesterday, during the day, most Asian countries saw an upturn, with Japan experiencing a slight decline of only 0.16%. Many indices of A-shares rose by 2.5% to 3.5%. The Hang Seng Index in Hong Kong closed with an increase of 5.23%, and the Hang Seng Technology Index rose by 7.8%.Subsequently, European stock markets opened higher and, despite some fluctuations during the trading session, all countries closed up by more than 0.5%, with the UK's increase being the highest at 1.3%.
03, The Federal Reserve's Pivot
In fact, in the face of another interest rate hike by the Federal Reserve, the reason why global financial markets experienced a significant rise is due to the market's growing anticipation that the Federal Reserve will review its decision to raise interest rates.
The Federal Reserve began raising interest rates in March of this year when the CPI reached 8.5%. During the process of raising rates, the CPI peaked at 9.1%.
So far, the Federal Reserve has cumulatively raised interest rates by 300 basis points, an unprecedentedly aggressive move in the past 40 years. However, even with this, the current CPI in the United States remains high at 8.2%, showing no significant decline.
On the other hand, several economic indicators in the United States have shown a clear downward trend, with the PMI continuously declining and GDP growth slowing down.
In the words of American netizens, only prices are rising.
It is not surprising that the United States will lead the world into a recession first. Under these circumstances, it is highly likely that the Federal Reserve will begin to adjust its interest rate hike strategy in the next few interest rate meetings.
04, U.S. Stocks
It is precisely for this reason that, despite the global market's rise last night, U.S. stocks still fell.At the opening, following the rise in other markets, the three major U.S. stock indices all rose together.
However, soon after, the indices began to fall rapidly, with the Dow Jones Industrial Average experiencing a maximum drop of nearly 500 points during the session.
By the time of the final closing, the three indices rebounded slightly, narrowing the losses.
Tech giants saw significant declines, with Amazon falling by 5.5% and Google by 4%.
The tech stocks that have been driving the U.S. market forward have recently announced their third-quarter performance data, which is generally less than ideal.
The most common scenario is a slight increase in revenue, but profits are significantly lower than expected, leading to substantial declines in the stock prices of tech giants.
It has become evident that the United States' hope to avoid its own difficulties by once again shifting the crisis is unlikely to be realized, and ultimately, it is the U.S. economy and American households that will bear the consequences.
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