"Market competition narrative: Powell VS Trump"

As the Christmas holiday approaches, the market narrative begins to diverge: with Powell turning, the Federal Reserve "hawkish", investors who were excited about Trump's policies now have to consider adding a more specific risk to the outlook, that the anti-inflation task is still incomplete. Against the backdrop of the "tug-of-war" between the prospects of Trump's policies and inflation, multiple asset classes such as US stocks experienced a rollercoaster of ups and downs this week. On Wednesday, the Federal Reserve stated that inflation rates will remain higher than expected next year, reducing the expected number of rate cuts for 2025 from 4 to 2, and concerns about the inflation outlook caused a sharp drop in US stocks, triggering a global market earthquake at one point; while yesterday's announcement of November PCE inflation data coming in below expectations, the market sentiment slightly recovered, stimulating a strong rebound in the S&P. At the same time, the "Trump trade" fueled by Trump's election as U.S. president is cooling off, and as the most representative asset of this trade, the price of Bitcoin has fallen from the $100,000 mark. Max Gokhman, Senior Vice President of Franklin Templeton Investment Solutions, said: "Many people, even those who expected the Fed meeting to take a hawkish stance, are surprised." "Some believe we'll see a release of animal spirits based on the new president's agenda (i.e. psychological expectations), while others think there will be serious inflation, which is actually a tug-of-war that will weigh on stock prices." With Powell turning, the Fed is poised to regain market dominance Various signs suggest that the Federal Reserve seems more likely to regain market dominance. After the Fed announced its rate decision, US stocks almost wiped out all gains since election day. Since November 5, the Dow has accumulated nearly 2800 points, but as of Wednesday's close, this cumulative gain has shrunk to 100 points. Some believe that the market's strong reaction indicates that the Fed is the "boss", and the market impact it eventually brings is greater than expectations of Trump's policies. Art Hogan, Managing Director and Chief Market Strategist at B. Riley Investments, said that the Fed's forecasts on interest rates and inflation are like a "heavy blow to the market": "It's making everyone scared." Callie Cox, Chief Market Strategist at Ritholtz Wealth Management, believes that some of the excitement around optimistic expectations for Trump's policies "is gradually fading", with some market focus shifting to potential growth risks from tariff policies. The bond market seemed to have foreseen this early on, as the yield on 10-year US Treasuries had been on an upward trend for several weeks before Trump's election. This article was reposted from "Wall Street News" by author Li Xiaoyin; translated by GMTEight editor Liu Xuan.