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Understanding the Federal Reserve’s Bold Monetary Policy Shift and Its Implications for the Global Economy

The Federal Reserve, under Jerome Powell, has executed a significant pivot in monetary policy by reducing the key interest rate by 0.5%. This drop is equivalent to two standard rate cuts in one move. But what does this mean for investors and markets? Let’s break it down:

The rate cut was widely expected, with rumors circulating among Wall Street insiders that a 0.5% reduction could happen. However, most market participants remained skeptical until it actually took place. The immediate response was a surge in markets across sectors, from stocks to cryptocurrencies and gold.

A reduction of this magnitude has only occurred four times in the last 35 years, usually during periods of severe economic stress—crisis, recession, or market crashes. This unusual move suggests that the Fed is deeply concerned about the economic outlook, and it’s important to understand why.

The reason for Powell’s concern is clear: U.S. elections. The Fed is under pressure to maintain market stability, as a significant downturn could favor political opposition. This explains the Fed’s cautious balancing act—hawkish rhetoric at the beginning of the year, followed by a dovish shift by August. It’s a delicate dance, akin to walking a tightrope.

Wall Street and large asset managers have long pressured the Fed, warning that excessively tight monetary policy could destabilize businesses and potentially bankrupt the U.S. in its fight against inflation. The imbalance in bond and money markets has only grown, culminating in this dramatic rate cut. Insider trading and market shifts were evident as early as August, as seen in the U.S. 10-year Treasury yield spike, signaling a market turnaround.

Conclusion:

1. The reduction of inflation to near-target levels is, in reality, more about manipulating numbers than solving fundamental issues. While inflation hasn’t been fully addressed, high rates have brought many businesses to the brink of bankruptcy globally.

2. The Fed, fearing a pre-election economic collapse, will likely continue its aggressive and unconventional tactics, as evidenced by the -0.5% cut.

3. Despite the rate cut, interest rates remain elevated. If markets show further signs of distress, another sharp reduction could follow.

4. A large bubble is forming in the markets, and while no one seems ready to address it yet, volatility will likely dominate the coming months.

The Fed’s actions will support the markets for the time being, but the looming risk of a recession remains very real. It is critical that we fully understand this situation, or we risk being blindsided by an economic wave that could sweep everything away.

Hello, friends!

Despite being on a brief sick leave, many close friends have been asking about market forecasts, so here’s a quick overview:

1. U.S. markets are just 4% below their historical peaks — an incredible performance, showing strong resilience with recent 9% dips almost fully rebounded within a week.
2. NVDA, a major market driver last year, saw a 20% drop after its latest earnings report. However, considering its rise from $49 in January to $108 now, it’s still up 120% in just 8 months.
3. The crypto market appears weak, heavily pressured by government officials and bankers trying to gain control. The volatility in this new industry is akin to rock and roll—expect it to continue.
4. The Fed has indicated it’s time for monetary policy changes, suggesting more volatility ahead for both stock and debt markets.

In summary, I don’t see significant market turmoil yet. A 15-20% correction in the U.S. could positively influence further development.

Conclusion: Things are generally calm, but concerns about recession, geopolitics, and monetary policy remain. Remember, markets don’t grow forever; crises occur swiftly while recovery takes longer and should be savored.

Stay tuned for more updates.

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USA

The U.S. is currently in the midst of an election campaign. As autumn approaches, the elections will increasingly influence Wall Street quotations, including currencies, commodities, and more. Geopolitics, it seems, currently dominates the financial market, with all eyes on when Powell will begin reducing rates. 

While Powell anticipates only one rate cut this year, analysts are calling for two from the Federal Reserve, but the Fed remains firm due to strong U.S. unemployment indicators. With inflation decreasing, analysts expect a rate cut. Thus, the market is factoring in cheaper money regardless. We witnessed the U.S. market rally continue: both NASDAQ and S&P500 hit new all-time highs in the Q2. We are now entering the Q3, which historically varies. July usually sees growth, showing about a 2% increase since 1978, while August and September are typically down months. Given the aggressive presidential race in the U.S., we might see both pleasant and unpleasant surprises. Nonetheless, we expect a muted quarter, keeping an eye on the major U.S. companies delivering top reports. The hype on AI, pharma, and biotech sets a high target for the upcoming quarter.  

ASIA

China continues a positive trend following a significant correction in the market after 2021-2022. We are witnessing the first year of growth and stabilization in the real estate market. The Chinese market has stopped falling, giving investors hope for a robust recovery. We saw this in the Q2 and expect China to deliver strong economic indicators (forecasted at 4.5% this year and 5% next year). Chinese indices will appear more frequently in our portfolios, with a growth potential significantly higher than that of the U.S. We will continue to monitor and add Asian securities to our portfolio.  

Our main concern is the falling yen in Japan, which regulators will need to address. We expect intervention from the Bank of Japan. In general, a weak dollar, expected after the rate cuts, might support the Japanese yen. Meanwhile, Japan is facing several challenges: currency devaluation, a declining real estate market, and lackluster economic performance. 

EUROPE

Europe also has many elections this year, with all eyes currently on France. Across Europe, more right-wing, conservative, and strict leaders are coming to power, leading us to expect some market instability. There are corrections in the DAX and Euro Stoxx, but the European economy remains highly diversified and strong. Despite high debt, shares of some European companies are growing significantly. We particularly see robust growth in Germany, which nearly mirrors the broad U.S. market (S&P500 index). The DAX resembles the S&P 500 market, so we anticipate increased volatility in Europe this quarter amid various country elections. 

GOALS

Our plan for the Q3 is to execute all ideas acquired last quarter. We expect growth in commodities, betting on oil, gold, silver, and sugar, as well as on the U.S. technology sectors. Having worked vigorously last quarter, we now anticipate realizing these efforts. Our goal remains to earn about 30% for the fund this year, and the first half has set us on this run-rate. We will strive to maintain this track and achieve around 30% in 2024.

The Federal Open Market Committee also indicated that, in its opinion, the long-term interest rate is higher than previously indicated.

Andrey Syrchin listened attentively to the speech of J.Powell and drew conclusions:

The decision on the rate was expected, the comments on it were much tougher than the market expected, so everyone wanted to hear the chairman’s speech.

According to Andrey, the head of the Fed made it clear harshly that inflation of 2% is a clear goal. The statistics are good, but they have not been studied carefully yet, and for this reason they will keep the bet high. The most important thing is that this year there is a maximum of one rise, but the market is still laying two rises. Andrey believes that there will not be a single rise if the markets and the economy remain in the same track!

While the market is digesting this, we see that Bitcoin has fallen a little, oil has fallen, gold and silver have fallen! The market is still being pulled by 5-6 companies.

The forecasts for business and the market are disappointing. We are watching what will happen next.

According to rankings compiled at the beginning of the year, the following cities lead in the number of billionaires:

New York (USA):
110 billionaires with a total net worth of $694 billion.
The wealthiest resident—Michael Bloomberg ($106 billion).
The ‘Big Apple’ has topped this list for 11 years in a row, except for 2021.
Among New York’s billionaires are 62 Wall Street magnates, as well as figures from the financial and investment sectors, 14 real estate tycoons, and a dozen moguls from the fashion and retail industries.

Moscow (Russia):
74 billionaires.
The wealthiest resident—Vagit Alekperov ($28.6 billion).
Moscow made an impressive leap from sixth to second place after the number of billionaires increased by 12.
The growth in the number of billionaires in the Russian capital is attributed to the economic recovery following the downturn in 2022. This includes the owner of Gloria Jeans, which benefited from the departure of foreign companies from the fast-fashion segment.

Sharing second place with Moscow is Hong Kong (China):
74 billionaires.
The wealthiest resident—Li Ka-Shing ($37.3 billion).
This year, Hong Kong saw an increase of four billionaires—newcomers to this ranking, such as Jean-Louis van der Velde, the CEO of Tether.

Mumbai (India):
66 billionaires.
The wealthiest resident—Mukesh Ambani ($116 billion).
Mumbai also made a significant jump, moving up from seventh place, adding 11 billionaires from the engineering and construction business.

Beijing (China):
63 billionaires.
The wealthiest resident—Zhang Yiming ($43.4 billion).
Beijing, which held the top spot in 2021, has dropped to fifth. The fall in the rankings is related to the country’s economic difficulties.

Other cities in the top ten include:

Los Angeles (USA).
San Francisco (USA).
Shanghai (China).
London (United Kingdom).
Abu Dhabi (UAE).

It is worth noting that the number of billionaires worldwide continues to grow. In 2024, the number of people with a net worth of over $1 billion reached a record 3,200. Almost a quarter of them (750 people) reside in just 10 megacities, and the list of cities with the most billionaires is constantly changing, reflecting shifts in the global economy.

The data on the number of billionaires in different cities may vary depending on the sources.

This information is based on data from Forbes, Hurun, and other authoritative rating agencies.