On December 1st, Federal Reserve Chairman Jerome Powell indicated in his prepared remarks at the Brookings Institution think tank that "it's time to slow down the pace of interest rate hikes," suggesting a reduction in the aggressive tightening that has seen increases of 75 basis points since June, with the possibility of slowing the pace as soon as December. However, he cautioned that inflation remains too high and supports continued rate hikes, with the peak rate potentially exceeding the expected 4.6%, and the Fed will explore the peak rate needed to bring inflation back to the 2% target.
He also hinted at a long-term economic adjustment, as evidenced by the Federal Reserve's economic Beige Book released that day, showing a more pessimistic outlook among U.S. businesses regarding the economic future. This adjustment is to accommodate persistently high borrowing costs, a slow decline in inflation, and a long-term labor shortage in the U.S. This was his last scheduled public speech before the Federal Reserve's December meeting, sending a signal that spurred a market surge.
The U.S. stock market closed significantly higher, with the S&P 500 jumping 3.09% to 4,079.97; the Nasdaq Composite surged 4.41% to 11,468.00; and the Dow Jones Industrial Average rose sharply by 2.18% to 34,589.24 (entering a technical bull market).
The U.S. dollar index and U.S. Treasury yields plummeted significantly, with the U.S. dollar index falling as much as 1% during the day to around 105, the 10-year Treasury yield dropped to 3.62%, and the 2-year Treasury yield also fell more than 20 basis points from its intraday high to 4.33%.
Meanwhile, non-U.S. currencies soared, with the Australian dollar, British pound, and Japanese yen all rising more than 1% against the U.S. dollar. The Chinese yuan continued its counteroffensive, with the offshore yuan trading at 7.06 per U.S. dollar as of press time, even reaching 7.03 per U.S. dollar at one point, up more than 1000 points from the New York close on November 30th. The trading range was between 7.16 and 7.03, continuing the strong performance of the previous trading day with a gain of 1060 points, marking the largest single-day increase since November 10th.
Crude oil and gold prices also rose in tandem, with spot gold gaining over 1.2% to $1775 per ounce, and spot silver surging past $22, closing up 4.41%. West Texas Intermediate (WTI) crude oil reclaimed the $80 mark, and Brent crude closed up 2.07% at $86.7 per barrel.
Against these backdrops, Wall Street is calling for a long position in the Chinese market and the purchase of Chinese assets. The most attractive to investors in Bank of America's latest 2023 preferred trade report released on November 24th is "going long on the Chinese market and shorting U.S. tech stocks."
Citigroup is even more bullish on China's economy and financial markets, stating that "China can achieve an attractive internally driven recovery." Subsequently, UBS also upgraded its rating on Chinese stocks, believing that the time for better returns in the Chinese market has arrived. We have noticed that the latest research reports from Goldman Sachs and JPMorgan Chase have also sent signals to "go long on the Chinese market."
In fact, Warren Buffett and his long-time partner, Charlie Munger, have also praised the Chinese market and Chinese companies in different settings and media in recent years, and they have predicted that the Chinese market has many opportunities and great potential. At this critical moment, another unexpected event has occurred.
This event is that in the context of persistent high inflation and the potential detonation of the U.S. debt crisis, Americans are beginning to doubt whether the U.S. dollar can continue to serve as a long-term store of wealth. An increasing number of Americans are scrambling to buy and hoard gold to cope with inflation and the continuous decline in the purchasing power of the U.S. dollar, among other uncertainties.According to the latest data released by the United States Mint on November 28, as of November 25, 2022, the sales of American Eagle gold coins reached a staggering 1.528 million ounces. Notably, the total sales for September and October alone amounted to 201,500 ounces, marking a 24% increase compared to the previous two months. This figure is also close to the annual sales volume of 2020 and, significantly, only took nine months to match the entire year's sales volume of the previous year. Following the strong performance of 1.2 million ounces in 2021, this is another robust indication that readers should take note of as a market signal.