What is the outcome of the joint budget proposal? Keep an eye on these Indicators in the short term!

Federal Reserve cuts interest rate by 0.25cm

The Fed's projected reduction of 0.25cm and adjusted the Fed Funds Rate Target Range to between 4.00%-4.25%, the Fed's first reduction since December 2024. What is more important for the market is the remarks of Fed Chairman Bill Wale after the opening press conference, and the scorecards of the Fed officials.

(Source: Fed website)

On the latest bitmap, officials broadly agree that two more rate cuts will be made before the end of 2025, and the rate will drop a further 50 pips. However, for the judgment of the end of 2026, there is a big difference with the market. Officials generally believe that only one rate cut is needed before the end of 2026, with interest rates essentially unchanged in 2027, 2028 and the longer-term interest rate target. That is, the Fed currently considers that interest rates are conditionally higher than market expectations, which leads to a fall in the post-rate, bond and foreign exchange markets. $U.S. 10-Year Treasury Notes Yield(US10Y.BD)$ Rebounding after a low of 3.99%, a slight increase to 4.09%; $USD(USDindex.FX)$ Rebounded after falling to a 3-year low of 96.214. In terms of the stock market, $S&P 500 Index(.SPX.US)$ und $Nasdaq Composite Index(.IXIC.US)$ Repeatedly reliable performance, $Dow Jones Industrial Average(.DJI.US)$ It's in financial stocks. $JPMorgan(JPM.US)$ $Goldman Sachs(GS.US)$ Favourable interest rate cuts are expected to support a bearish upturn. From the bitmap, Fed officials' expectations for a rate cut clearly demonstrate a hawkish stance.

Impact of interest rate cuts in the United States

Here are the expected changes in CME Interest Rates ahead of the Practitioners Day talk and today's latest CME Interest Rates~

(Source: CME)

It can be seen from the above changes that after the meeting, the market forecast interest rates at the bottom of 2026, the initial tapering rate decreased by 50 points, and the total number of losses more than doubled, and the Fed officials announced a reduction in the forecast temperature in the bullish field on the spot chart. The latest Interest Rate Futures show that the Bundestag will decrease by 5 times in 2026 and the Interest Rate Target Range will return to 2.75~3.00%.

Without further elaborating on the downside forecast changes described above, the biggest difference is not less space for downfalls, but only the possibility of a 50-point drop in air in one joint venture. All the steps of the slowdown will continue in a cyclical manner and see the economic situation deteriorate. In the economic-level view, the Fed is holding a hawkish stance on MMF policy, only reflecting on the outlook for the economic outlook that officials expect. If the downward pressure on the economy increases, the Fed's tapering will naturally increase. The Fed Put is expected to remain unchanged from the past few months of economic changes in the United States, Interest Rates and Fed officials' remarks.

*Fed Put is a technical language in financial markets that indicates that the Federal Reserve, or Fed, tends to adopt a loose monetary policy when there is significant downside risk in the economy or markets (if bearish or Algo broadening will stabilize the market and avoid the behavior of the Fed). This is like a secret insurance policy, allowing investors to trust the Fed to carve out a hand in the market at a moment's notice.

The Fed's current monetary policy remains in the direction of tightening, and the Fed will continue to carry out Algo Tightening (QT), U.S. debt and mortgage-backed securities (MBS) reductions of USD 5 billion and USD 35 billion per month, respectively.

However, the bitmap also shows that the Fed forecasts unemployment at 4.5% this year, 4.5% in June; 4.4% next year, 4.5%; 4.3% in 2027, previously expected at 4.4%; forecast for 2028; 4.2% for the longer cycle, 4.2%, previously expected at 4.2%. From the above data, the Fed has maintained more optimistic expectations for the labor market so far. But a statement after the meeting emphasized “close attention to the labor market” and suggested that the Fed could move quickly toward easing policy if the unemployment rate unexpectedly rises. This is the shadow of “Fed Put”.

What is the impact of the US interest rate cut on the stock market?

After the announcement of the interest rate, bond exchange performance fluctuated but lacked a clear direction. Mainly because interest rate cuts are expected to cool but the Fed Put is expected to remain unchanged, the following factors can be kept in mind when deploying a short line.

1. U.S. 10-year Treasury note (aka risk-free rate)

US 10-year Treasury yields have recently fallen to around 4pc, although the interest rate cut cycle has begun, but given that concerns about the US fiscal deficit are not completely eliminated, short-term debt is likely to remain around current levels. As long as there is no sudden black swan event in the market, and the entire downtrend should not change. For short-sighted investors, the overall market is expected to remain relatively stable as long as the 10-year US debt ratio remains around 4~ 4.2% (the ultra-short line is 4~ 4.1%).

2. Russell 2000

In the last three months, $Russell 2000 Index(.RUT.US)$ The big three indicators of US stocks are winning, and the main ones are small stocks that suffer from the downside. Rosen 2000 appears in the form of a multi-headed row on the average mobile line. Stocks are just beginning to exert pressure on the high side after rebounding above 2453 points above the index. If short-line funds start to flow from small stocks to outflow from traditional large-cap stocks to traditional large-cap stocks, it is better to reflect the market on a healthy level and avoid the risk of a market bubble.

This does not mean that the market will be completely informed, but the topic of AI is market focus, such as computing power, applications, or peripheral energy, cooling or quantitative computing, which can continue to be a market topic, such as Stocks, market news and gas, operational technology Technical analysis is possible.

As for large stocks, stocks on a streaming platform can be appreciated. The main reason is that we have a common place, stable users and are not sensitive to the economy, while the company has a strong Operating Cash Flow. eg $Netflix(NFLX.US)$ either $Spotify Technology(SPOT.US)$ As a sample. It can be assumed that these Stocks may come under technical pressure in the short term.

3. S&P 500 Index or NAR 100Index

The Federal Reserve maintains a bullish stance on MMF policy, but in combination with the Fed Put after the press release, the current view of US equities is bearish. It is highly likely that it is only possible to lead to a rise further in the light of the high valuation variations, although the upper trend and the rise in the upper level of the ridge are only possible. Maintain. At the same time, we had a positive signal from the beginning of the morning, but the short line did not produce any weak crosses, so the conditions are good for the continuation of the Bullish position.

Tracking ETFs that feature large indices is a good choice for hedging investors, such as tracking the S&P 500 Index $SPDR S&P 500 ETF(SPY.US)$ either $Vanguard S&P 500 ETF(VOO.US)$ and tracking $NASDAQ 100 Index(.NDX.US)$ of $Invesco QQQ Trust(QQQ.US)$ 。 However, the upside will increase the chances of a significant increase, and due to the level of the IV wave relative to the lower level, investors can adopt a common options strategy strategy, such as the ETF investment combination abovecovercallstrategy, Buy 100 shares and issue a call option, plus additional withdrawal options money.

Alternatively, some options strategies can be used to extract profits, such as to avoid losing profits, for example, to avoid selling options, the high risk and high cost guarantee gold when using Vertical Speard options to withdraw options. High Risk and High Cost Guarantee, you can use a Vertical Speard Strategy, you can use a Vertical Speard strategy, you can use a Vertical Speard strategy, and you can take profits by selling a sell cross option group by selling a sell cross price option group, while avoiding viewing Significant damage caused by the method.

Vertical Spread's strategy is to Buy and Sell on the same dates at the same time, with buy and put options at different Strike prices. It is important for investors to decide on their own how to price Assets.

Bullish strategy ~Bull Put Spread, Trade the Fixed Option Put (PUT), (Put), Sell the High and High Line using Strike Price and buy the Buy Low Line option put using Strike price, take the current spread.

Bearish strategy ~Bear Call Spread, by trading Buy optionsCall (Call), (Call), Sell& Sell High using StrikePrice's Buy and Buy and Lower Line using Strike price Strike price call, take the current spread.

The above picture is for instruction manual only

*The above options and ETF strategy is for investment education only and does not represent any investment opinions

Futu Securities, Chief Analyst, Hui Chi-Lok

(The author is a licensee of the Securities and Exchange Commission and its affiliates do not have any financial interest in the proposed issuer of shares)