22:00, the Federal Reserve Fires the First Shot for the Bull Market

——The Federal Reserve is starting to feel that "the market is getting too comfortable."

At the global close, everything is developing in the direction Trump hoped for:

- U.S. Treasury yields fell, with the 10-year yield at 4.55% and the 30-year yield at 5.06%;

- U.S. stocks rose, with the Dow Jones up 0.58%, the S&P 500 up 0.37%, and the Nasdaq up 0.19%.

However, it is not time to completely let down your guard, as the Federal Reserve gave the market a slight shock last night.

Federal Reserve “heavyweight permanent member” Waller stated that he supports removing the "easing bias" wording from the policy statement and also supports making it clear that the chances of the Fed's next move being a rate hike or a rate cut are about the same.

In the past, such words were akin to a "nuclear bomb"; it would have been the Fed's first shot at the bull market—if the S&P 500 didn't fall at least 2%, it wouldn't match the weight of this statement, which means the Fed is now officially acknowledging that "the next move could be a rate hike." However, last night was the swearing-in of the new Fed Chair, a period of political protection, and major politically sensitive funds did not dare to sell on this day. In addition, the market was still overwhelmed by news from Iran, so after his remarks, the stock market only fell slightly.

Waller also made a statement that shocked the world: rising bond yields help suppress inflation. Many did not understand what he meant. Hours before his speech, we had published an article titled “The Federal Reserve, Secretly,” meaning “letting the market fall is the Fed’s third monetary policy tool” (apart from rate hikes and rate cuts, the best choice).

The logic is that by letting the stock market drop, the wealth effect disappears, consumption cools off, AI capital begins to contract, and inflationary pressures ease.

After his speech, the market increased the probability of a Fed rate hike in December to 66.6%.

Note the timing of Waller's remarks, around 22:00 Beijing time, just half an hour after the U.S. stock market opened (previous speeches always avoided this time). After his remarks, the gains in U.S. stocks narrowed, and although the markets closed higher, most of the day's gains were made at the open (after which stocks gradually edged lower).

This was also another subtle point in time, just one hour before Kevin Walsh was sworn in as the new Fed Chair. Waller chose this moment to act as the "bad guy," preemptively tipping the Fed's policy scale back towards a hawkish stance. This essentially built a levee for Walsh—even if the new Chair favors a dovish approach, the internal Fed has already put "rate hikes" back on the table, making it impossible for Walsh to act unilaterally or make arbitrary decisions. (Wall Street Intelligence Circle)