Viewpoint: Beware of the "Buy the Rumor, Sell the News" Effect as the New Fed Chair Takes Office, Uncertainty Set to Peak from July to November

BlockBeats News, December 29th. Nomura Securities issued a warning, anticipating that after the new Federal Reserve chair takes office in May next year, they will lead a rate cut in June. However, with the recovery of the U.S. economy, strong opposition within the Federal Reserve to further rate cuts may arise. Policy disagreements will not only weaken the market's confidence in the new chair but may also trigger tension between the Federal Reserve and the Trump administration. If the Federal Reserve maintains the interest rate after the June meeting, friction with Trump, who demands further rate cuts to boost midterm election prospects, will inevitably arise.

Nomura expects that uncertainty will intensify from July to November next year. During this time, a trend of "escaping U.S. assets" may emerge in the market, leading to a decline in U.S. bond yields, a stock market pullback, and a weakening dollar. Investors need to beware of potential liquidity reversals during this period. Major global economies may also cease rate cuts and even begin an interest rate hike cycle, diminishing the relative advantage of holding dollar assets. A policy deadlock, coupled with bottoming out inflation and signals of the Federal Reserve ending its rate cut cycle, will exacerbate market volatility.