Man/Chinghua Financial Review
The current President of the United States, Biden, will withdraw from the presidential election, and will the Democrats run for office? Will Trump be in the White House again? These are all uncertainties. At the same time, the Fed's probability of falling interest rates in September has exceeded 95 per cent, and it is certain that the variable will be whether to start in July or in September, and in which industries will the decline boost? Zenium
Uncertainty about the U.S. election. Black swans.
In the early hours of Beijing time on 19 July, former leader of the Democratic Party of the United States, Pélosi, publicly stated that the current President, Biden, was being persuaded to withdraw from the presidential election and that there might soon be news. Soon there were reports that the White House in the United States had declared Biden to be positive.
With regard to the Fed's interest rate reduction, the probability of action in September had exceeded 95 per cent. So the question is, is the Fed going one step ahead and choosing to cut interest on July 31st, Eastern time? Biden and Trump have plans for this.
The Fed's interest rate decrease is certain.
Although negative statements against Biden from the outside are on the rise, Biden is not, in fact, yet a failure. For Biden, of course, it is hoped that the Fed will be able to act by the end of July. With a drop in interest rates, the United States economy could be stimulated, as well as benefiting the United States stock market. As a result, more people would vote for Biden of the Democrats, and it would not be impossible for Biden to reverse the decline.
At the same time, for Trump, the Fed would certainly be expected to lower interest rates later, and the Democrats would not want more credit for the economic improvement.
The market now expects that the Fed will reduce interest rates twice in 2024 and possibly four times in 2025. In addition, the market believed that if Trump was elected successfully, he would put more pressure on the Fed to reduce its interest rates.
The market is shaken by variations in the US general election, but it needs to be seen whether the Fed’s interest rate reduction, a certain event, will start in July or September.
What are the industries that benefit from the Fed interest rate reduction?
Once interest rates are reduced, three years (2024-2026) are likely to last, and which sectors of the United States capital market will benefit from this?
One is banking. The fall in interest rates helps to stimulate economic growth and domestic demand, which is beneficial to banks. When banks lower the interest rate on loans, it is easier for enterprises and individuals to obtain loans, which can help boost investment and consumption and thus stimulate economic growth. Economic growth, in turn, will have a positive impact on the banking sector, as more economic activity implies increased demand for bank loans, which is conducive to increased business growth and increased profitability.
Reductions in interest rates can increase bank liquidity. The reduction in interest rates could lead to an outflow of funds from banks and a shift from savings to investment or consumption, with the result that liquidity would increase. This provides banks with more financial resources and broader business space.
Interest-rate reductions can ease pressure on banks in the area of commercial property. The Moody ' s report states that by lowering interest rates, ‌ can ease bank pressure on commercial property loans, which can help to improve the bank ' s financial position and reduce the risk of bad debts.
In fact, investors have begun to calculate the expected interest-rate reductions into capital markets, with United States financial units such as United States banks, American Express, and others, such as visa, performing well recently.
The second is consumer goods that are just in need. Declining interest rates can help to stimulate increased spending by consumers and businesses, which can be a positive catalyst for consumer goods such as food, basic necessities, etc., which means that more consumers can afford these basic necessities of life, which will further stimulate demand. At the same time, interest-rate reductions can increase consumer and business confidence, which can also help to increase the willingness to purchase consumer goods in the demand category.
The third is the restructured Science and Technology Unit. The view was expressed that, if Biden withdrew, the NASDAQ index would “break down” because the Silicon Valley in the United States was the home of the Democrats and the Silicon Valley would be “hit” when Trump came on stage. In fact, the recent reversal of the NASDAQ index is due in large part to the alarming increase over time, which is not a good thing for any market to surge in a short time, requiring a return to the risks.
Technology is the first productivity, and the United States knows it. The reduction in interest rates would make the market more liquid and, as the technology unit was restructured, the capital would be re-oriented to the United States science and technology unit.
Editor of this article
First trial, Tsui Lanying.
Zhang Wei, final trial
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