September 29th, 2025

The Fed’s first rate cut: What it means for equities, risk, and crypto

The Federal Reserve has officially initiated its rate cut cycle, a move long anticipated by markets that have already priced in approximately 3.8 cuts over the next 12 months. I forecast two additional reductions on October 29 and December 12.

Historically, the period immediately following the first rate cut has been marked by heightened volatility as markets recalibrate their expectations, reassess risk premiums, and digest the implications of a new monetary regime.

This transitional phase is particularly delicate because it often coincides with divergent signals from economic data, political uncertainty, and evolving investor positioning. All of these factors are present in today’s environment.

Equities and the magnificent seven effect

Equity markets, led by the S&P 500’s impressive 32 per cent rally from its recent lows, reflect a strong recovery narrative driven disproportionately by the so-called Magnificent Seven (Mag7) stocks. These technology and growth-oriented giants continue to post earnings growth roughly four times that of the remaining 493 companies in the index, underscoring their outsized influence on overall market performance.

However, this concentration introduces significant risk. Mag7 valuations now exceed 30 times forward earnings, not yet at their historical peaks but certainly in elevated territory. While historical backtesting suggests that equities generally perform well in the 12 to 24 months following the start of a Fed easing cycle, the current context differs in important ways.

The market’s narrow leadership, combined with stretched valuations, makes indiscriminate exposure to these names increasingly perilous. Chasing performance at this juncture could expose investors to sharp corrections if earnings disappoint or if macro risks materialise. Diversification, not just across sectors but across geographies and asset classes, emerges as a critical defensive and offensive strategy.

Investor positioning and market signals

Investor positioning data reveals that asset managers hold high equity allocations, though not at extreme levels that typically precede major drawdowns. Meanwhile, equity volatility remains subdued, a condition that historically correlates with lower forward returns over the subsequent six to twelve months.

This low-volatility complacency can lull investors into underestimating tail risks, especially when other asset classes also appear expensive. Gold, for instance, has seen renewed inflows into bullion-backed ETFs and now trades near US$3,760 per ounce, supported by geopolitical tensions and a modestly weaker US dollar, which closed at 98.152.

Yet gold positioning is once again crowded, suggesting limited room for further upside without a significant catalyst such as a sharp escalation in global instability or a deeper-than-expected economic slowdown. Similarly, credit markets show tight bond spreads, indicating that investors are not demanding much compensation for credit risk. In such an environment, security selection becomes paramount.

Broad exposure to high-yield or investment-grade debt may not suffice. Instead, bottom-up analysis of issuer fundamentals is essential.

Mixed economic signals and political risks

The macroeconomic backdrop offers mixed signals. August’s Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, rose 0.3 per cent month-over-month, resulting in a 2.7 per cent annual headline rate. Core PCE, which excludes food and energy, stood at 2.9 per cent year-over-year after a 0.2 per cent monthly increase.

This remains above the Fed’s two per cent target but shows signs of gradual moderation. The data came in largely in line with expectations and did not provoke a strong market reaction, suggesting that investors have already internalised a path of gradual disinflation. However, political risks loom large.

The September 30 deadline for US government funding is fast approaching, and with congressional negotiations stalled, the probability of a partial shutdown is rising. While past shutdowns have had limited economic impact, they inject uncertainty into market psychology and could delay fiscal policy decisions or data releases, further complicating the Fed’s communication strategy.

Wall Street’s reaction and treasury yields

Market reactions to recent events have been muted but telling. Wall Street closed higher last Friday, ending a three-day losing streak, with the Dow Jones up 0.7 per cent, the S&P 500 gaining 0.6 per cent, and the Nasdaq rising 0.4 per cent.

Notably, markets barely flinched at the announcement of new sector-specific tariffs by the Trump administration, signalling either desensitisation to trade rhetoric or confidence that such measures will not significantly disrupt the broader economic trajectory. Treasury yields reflected this calm.

The 10-year yield edged up just one basis point to 4.183 per cent, while the two-year yield dipped two basis points to 3.645 per cent, flattening the yield curve slightly. This dynamic suggests that while near-term rate expectations are stable, longer-term growth and inflation concerns persist.

Asia’s cautious mood and key data ahead

In Asia, equities dipped on Friday as resilient US data prompted a modest reassessment of rate cut expectations. US equity index futures point to a higher open, indicating that global investors remain cautiously optimistic. The coming week will be pivotal, with the September nonfarm payrolls report on October 3 serving as a key barometer of labor market health.

Additional insights will come from the JOLTS job openings data on Tuesday and the ADP private payroll report on Wednesday. Labour market strength remains the Fed’s primary concern. If employment data remains robust, it could delay further rate cuts or reduce their magnitude, directly impacting risk asset valuations.

Bitcoin’s technical recovery

Meanwhile, Bitcoin has staged a “reasonable” technical recovery, rising 2.24 per cent in the past 24 hours to US$111,966 after a 7-day decline of 2.23 per cent. This rebound appears driven by three converging factors. First, price action held firm at the US$108,680 support level, breaking a bearish trend line and reclaiming the US$111,000 mark.

Hourly indicators, including a bullish MACD crossover and an RSI stabilising around 47-48, suggest that short-term momentum has shifted in favour of buyers. The 200-day exponential moving average at US$106,200 continues to act as a structural support, reinforcing the asset’s resilience.

However, the critical test lies ahead. A sustained close above US$112,500, the 50 per cent Fibonacci retracement of the recent decline, could pave the way for US$113,700 to US$115,000. Failure to break this resistance may invite profit-taking and a retest of the lower support level.

On-chain metrics and corporate adoption

Second, on-chain metrics show improving demand dynamics. The 60-day Buy/Sell Pressure Delta has entered what analysts describe as an opportunity zone, indicating reduced selling pressure.

The decline in sending addresses and stable miner reserves, holding steady at 1.8 million BTC, suggests that long-term holders are not capitulating. That said, the 90-day delta remains cautious, reflecting lingering uncertainty among larger participants. The Coinbase Premium Index, currently at +0.041, will be a key gauge of sustained US institutional interest.

Third, corporate adoption continues to provide narrative support. The rebranding of 164-year-old Japanese textile firm Marusho Hotta to Bitcoin Japan and its announcement of a BTC treasury business, while small in absolute scale, aligns with a growing trend among Asian corporations seeking alternative stores of value amid declining traditional revenues.

Firms like Metaplanet and Kitabo have similarly adopted Bitcoin, reinforcing its digital gold thesis in a region that is increasingly skeptical of fiat stability.

Final thoughts: Selectivity over momentum

In sum, the current market environment demands a nuanced approach. While the Fed’s pivot to easing should, in theory, support risk assets over the medium term, the combination of expensive valuations, narrow market leadership, and external risks ranging from a potential government shutdown to geopolitical flare-ups calls for disciplined selectivity.

Investors should avoid chasing momentum in already crowded trades and instead focus on quality earnings, global diversification, and tactical entry points during pullbacks.

Source: https://e27.co/the-feds-first-rate-cut-what-it-means-for-equities-risk-and-crypto-20250929/

Anndy Lian

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com

j j j

May 13th, 2025

Current market dynamics: Equities, FX, commodities, fixed income, and cryptocurrencies

The interplay of macroeconomic indicators, corporate earnings, currency fluctuations, commodity surges, and cryptocurrency volatility creates a tapestry of opportunity and risk.

My perspective on the topics at hand—US equities under inflation scrutiny, China’s corporate earnings, the Japanese yen’s precarious position, commodity price spikes, rising bond yields, and cryptocurrency corrections—leans toward cautious optimism tempered by a keen awareness of potential headwinds.

Below, I weave together a comprehensive narrative grounded in the latest data, offering insights into how these elements might shape the financial world in the near term.

As exemplified by the S&P 500’s recent performance, the US equity markets are navigating a delicate balance. According to the University of Michigan’s data, the index’s early-week rally was undercut by a dip in consumer sentiment, which hit a six-month low.

This downtick, coupled with a rise in one-year inflation expectations to 3.5 per cent—a semiannual high—signals growing unease among American households. The consumer has been the backbone of US market resilience, driving economic growth despite persistent inflationary pressures. However, the softening confidence metric raises questions about the sustainability of this consumer-led momentum.

The New York Fed’s upcoming report on household debt and credit, due this week, will be a critical piece of the puzzle. Elevated debt levels or signs of credit strain could amplify market jitters, particularly if paired with disappointing earnings from retail giant Walmart, whose results on May 16 will serve as a barometer for consumer spending trends.

Across the Pacific, China’s corporate earnings are commanding attention. The week’s lineup is a who’s-who of tech and manufacturing heavyweights: SoftBank on May 13, followed by Tencent, Alibaba, Hon Hai Precision, and Sony on May 14, with Baidu and JD.com rounding out the slate on May 16. These reports are more than just financial snapshots; they are litmus tests for China’s economic recovery and its ability to navigate global trade tensions.

Recent improvements in US-China trade relations, including a 90-day tariff cut accord, have buoyed traditional markets, with the Dow Jones Industrial Average surging nearly 1,000 points. Yet, the implications for Chinese equities are nuanced. Strong earnings from tech giants like Tencent and Alibaba could signal robust domestic demand and technological innovation, bolstering investor confidence.

Conversely, any signs of weakness—whether from supply chain disruptions or regulatory pressures—could dampen sentiment, particularly given the global scrutiny on China’s economic policies.

In the foreign exchange markets, the Japanese yen is once again under the microscope as the USDJPY pair approaches 156. This level is significant, both technically and psychologically, as it tests the Bank of Japan’s (BoJ) resolve to defend the yen. The yen’s weakness is partly a function of the US dollar’s strength, driven by expectations of persistent inflation and a hawkish Federal Reserve.

The upcoming US Consumer Price Index (CPI) data, slated for May 13, will be pivotal. Forecasts suggest April’s CPI will hold steady at 2.4 per cent, matching March’s figure. A higher-than-expected reading could further strengthen the dollar, pushing USDJPY toward 160 and potentially prompting BoJ intervention.

Conversely, a softer CPI might ease pressure on the yen, offering temporary relief. I believe the yen’s trajectory hinges on the Fed’s signaling. If the CPI data fuels speculation of delayed rate cuts in 2025, the yen could face sustained depreciation, exacerbating Japan’s import costs and inflation challenges.

Commodities, meanwhile, are experiencing a renaissance. Silver’s six per cent surge and natural gas’s five per cent gain last week underscore a broader trend of renewed investor interest in tangible assets. Silver’s rally is particularly noteworthy, driven by industrial demand (notably in solar energy) and its role as a hedge against inflation. Natural gas, on the other hand, is benefiting from supply constraints and heightened geopolitical risks, particularly in energy markets.

These gains align with the broader narrative of inflation expectations, as evidenced by the University of Michigan’s data and the New York Fed’s one-year inflation outlook. Commodities will remain a focal point for investors seeking diversification amid equity market volatility and rising bond yields. However, the sustainability of these rallies depends on global demand dynamics and the trajectory of inflation, both of which remain uncertain.

Speaking of yields, the fixed income market is sending clear signals of inflationary concern. The 10-year US Treasury yield’s breach of 4.5 per cent reflects heightened expectations of persistent price pressures, as captured by the University of Michigan’s inflation survey. This uptick in yields is a double-edged sword: it strengthens the dollar and tightens financial conditions, but it also raises borrowing costs, potentially crimping corporate investment and consumer spending.

For bond investors, the calculus is shifting. The prospect of a Federal Reserve maintaining elevated rates into 2025 suggests that yields could climb further, particularly if CPI data surprises to the upside. My take is that fixed-income markets are at an inflection point. Investors must weigh the allure of higher yields against the risk of capital losses if inflation accelerates beyond current projections.

The cryptocurrency market, meanwhile, is a microcosm of broader market dynamics. Bitcoin’s retreat to US$102,000, down 1.7 per cent in 24 hours, follows a failure to sustain momentum above US$105,000. This correction comes after a 24 per cent rally over the past month, highlighting the crypto’s volatility.

Data from Alphractal points to profit-taking pressure near the US$106,000 resistance zone, with a potential drop to US$100,000 threatening US$3.4 billion in leveraged long positions. The looming CPI release adds another layer of uncertainty. A higher-than-expected inflation reading could bolster the dollar, exerting downward pressure on Bitcoin, while a lower figure might spark speculation of Fed rate cuts, fuelling a crypto rebound.

Bitcoin remains a high-beta asset, amplifying macroeconomic trends. Its divergence from equities, which rallied on US-China trade optimism, underscores its unique risk profile. Investors should approach Bitcoin with caution, mindful of its sensitivity to monetary policy shifts.

Ethereum, by contrast, is riding a wave of bullish sentiment. Its 40 per cent surge last week—its largest since December 2020—is driven by spot buying rather than leverage, as evidenced by a declining estimated leverage ratio (ELR) from 0.75 to 0.69. The influx of over 180,000 ETH into staking protocols signals strong confidence in Ethereum’s long-term value proposition, particularly as a backbone for decentralised finance (DeFi).

However, ETH faces technical resistance at the 200-day simple moving average, with US$2,850 as the next hurdle. Ethereum’s rally is more sustainable than Bitcoin’s, given its lower reliance on speculative leverage and its growing utility in blockchain ecosystems. That said, macroeconomic headwinds, such as a stronger dollar or rising yields, could cap its upside in the near term.

In synthesising these threads, my overarching view is one of cautious navigation. The US equity market’s reliance on consumer strength is under scrutiny, with inflation expectations and household debt levels as key variables. China’s earnings will provide critical insights into global growth prospects, while the yen’s fate hinges on US monetary policy.

Commodities offer a hedge but are not immune to demand shocks, and rising bond yields signal tighter conditions ahead. In the crypto space, Bitcoin and Ethereum reflect broader market tensions, with CPI data as the immediate catalyst.

As a journalist, I see opportunity in this volatility but urge investors to tread carefully, armed with data and a clear-eyed view of the risks. The financial markets are a chessboard, and every move counts.

Source: https://e27.co/current-market-dynamics-equities-fx-commodities-fixed-income-and-cryptocurrencies-20250513/

Anndy Lian

www.anndy.com

j j j

March 20th, 2025

FOMC lits a spark: US equities, treasuries, and cryptocurrencies all riding the waves

The global financial landscape has been buzzing with activity following the Federal Open Market Committee (FOMC) meeting, where the US Federal Reserve opted to keep benchmark interest rates steady within the 4.25 per cent to 4.5 per cent range, a decision that was broadly anticipated by markets.

This move, coupled with a significant reduction in the pace of quantitative tightening (QT)—slashing the monthly redemption of US Treasury securities from US$25 billion to US$5 billion—has injected a dose of optimism into US equities, propelling a rally that saw the MSCI US index climb by 1.1 per cent.

Fed Chair Jerome Powell, in his post-meeting press conference, struck a cautious yet steady tone, acknowledging the swirling uncertainties tied to President Donald Trump’s sweeping policy shifts while emphasising that the central bank is in no rush to tweak borrowing costs.

Powell’s message was clear: the Fed can afford to wait for the dust to settle on these policy changes before making any bold moves. This measured approach seemed to resonate with investors, who found comfort in the Fed’s updated projections and its handling of inflation and growth forecasts.

Diving into the numbers, the Fed’s dot plot—a key indicator of future rate expectations—held steady, signalling two rate cuts anticipated for the year, with no notable shift in dispersion among committee members. However, the Fed did adjust its economic outlook, trimming the median growth forecast for 2025 to 1.7 per cent from 2.1 per cent, a nod to potential headwinds, while nudging up the median inflation forecast to 2.8 per cent from 2.5 per cent.

Markets, however, latched onto Powell’s reassurance that the uptick in the core Personal Consumption Expenditures (PCE) projection is confined to 2025 and likely transitory. This distinction quelled fears of entrenched inflation, allowing risk sentiment to advance.

The immediate market reaction was telling: equities surged by the end of Powell’s presser, US Treasuries flipped course with the 2-year yield dipping below 4 per cent and the 10-year yield shedding 4 basis points to 4.24 per cent, while the Dollar Index edged up 0.2 per cent. Gold, ever the barometer of economic unease, rose 0.4 per cent to a record US$3,048 per ounce, and Brent crude ticked up 0.3 per cent to US$71 per barrel. These movements paint a picture of a market buoyed by easier financial conditions yet still hedging against uncertainty.

Across the Pacific, the Bank of Japan (BOJ) mirrored the Fed’s steady hand, holding interest rates unchanged as expected. Governor Kazuo Ueda offered a cautiously optimistic take, noting that wage hike momentum remains on track—a critical factor for Japan’s long battle against deflation—but tempered this with concerns over US trade policies, a clear nod to the potential ripple effects of Trump’s agenda.

Similarly, Bank Indonesia followed suit, keeping its benchmark rates steady, aligning with market expectations. Asian equity indices, however, showed a mixed response in early trading, reflecting the region’s sensitivity to both US developments and local dynamics. Meanwhile, US equity index futures pointed to a higher open, suggesting that Wall Street’s rally might have legs yet.

The cryptocurrency market, often a bellwether for risk appetite, didn’t miss the beat either. Bitcoin soared past US$86,800 on Wednesday, a nearly five per cent jump, fuelled by the Fed’s signals of looser financial conditions and growing investor bets on a liquidity-driven rally.

The Fed’s decision to slow the runoff of its US$6.8 trillion balance sheet—capping Treasury redemptions at US$5 billion per month—aims to avert disruptions in funding markets, especially as debt ceiling tensions loom large. This dovish tilt has weakened the US dollar, which posted its third-largest three-day drop since 2015, while Treasury yields and bond market volatility have tumbled.

In the crypto space, the ETH/BTC trading pair ticked up from 0.23 to 0.24, a sign that investors are leaning into riskier assets like Ether over Bitcoin’s relative safety. Ether’s rise, though lacking an immediate catalyst, comes as the Ethereum network gears up for its Pectra upgrade, a major update set to roll out over 20 Ethereum Improvement Proposals (EIPs). These include EIP-7702, enhancing smart account functionality, and EIP-7251, which boosts validator staking limits—moves that promise to improve scalability and user experience, potentially stoking further interest in Ether.

From my perspective, the Fed’s latest stance is a masterstroke of pragmatism. By holding rates steady and dialling back QT, Powell & Co. are threading the needle between supporting growth and keeping inflation in check, all while navigating the wild card of Trump’s policy shifts. The market’s upbeat response—equities popping, yields dropping, and risk assets like Bitcoin and Ether surging—suggests that investors are interpreting this as a green light for risk-taking, at least in the near term.

The Fed’s acknowledgment of slower growth and higher inflation in 2025, paired with its “transitory” caveat, strikes me as a calculated effort to manage expectations without spooking markets. It’s a delicate dance, and so far, the Fed seems to be leading with confidence.

That said, the muted revisions to the dot plot—still pointing to two cuts—feel a tad optimistic given the uncertainties Powell himself flagged. If Trump’s policies (think tariffs, tax cuts, or deregulation) ignite inflation or disrupt trade, the Fed might find its hands tied, forced to choose between rate hikes that could choke growth or holding pat and risking credibility on inflation.

Globally, the BOJ’s steady stance feels like a missed opportunity. Japan’s economy could use a jolt, and with wage hikes gaining traction, a slight nudge on rates might have signalled more conviction in its reflationary push. Ueda’s caution about US trade policies is valid—Trump’s “America First” rhetoric could slam Japan’s export-driven economy—but it also underscores how interconnected these central bank decisions are.

Back in the US, the crypto rally is a fascinating subplot. Bitcoin’s surge past US$86,800 and Ether’s uptick reflect not just Fed-driven liquidity but a broader shift in investor psychology. The Pectra upgrade could be a game-changer for Ethereum, making it more competitive with newer blockchains, though its lack of an immediate trigger suggests this is more sentiment-driven than fundamentals-based for now.

In sum, the FOMC’s moves have lit a spark under global risk sentiment, with US equities, Treasuries, and cryptocurrencies all riding the wave of easier financial conditions.

The Fed’s cautious optimism, paired with its QT slowdown, has given markets room to breathe, even as it braces for the unknown of Trump’s policy fallout. Asia’s mixed response and the BOJ’s conservatism highlight the uneven global picture, but for now, the US is setting the tone.

Whether this rally has staying power will hinge on how those uncertainties play out—and whether the Fed’s wait-and-see approach holds up under pressure. For investors, it’s a moment to savor the upside while keeping an eye on the horizon.

Source: https://e27.co/fomc-lits-a-spark-us-equities-treasuries-and-cryptocurrencies-all-riding-the-waves-20250320/