Source: Brokerage China Author: Qu Hongyan Recently, China Yangtze Power hit a historical high and once again showed the slow bull stock trend of "tripling in ten years". The slow bull market has left behind many passers-by and brought good returns to the steadfast investors. It is "rare for those who triple in one year to be like carp jumping over the dragon gate, while those who double in three years are few and far between." On the other end of the investment world, however, violent collapses are also deafening, with many financial products suspected of "Ponzi schemes" ceasing payments, leaving investors with no hope of recovering their investments. Both positive and negative cases illustrate the importance of forming a suitable mentality towards money in one's lifetime; otherwise, sooner or later, you will divorce yourself from your money. "I call this the money mind, a person's IQ can reach 120, 140, or even higher levels, and perhaps some people's minds are good at doing one thing, while others are good at doing another. They can do things that most ordinary people can't do. But I know some very smart people who make very foolish decisions because they lack the money mind." Buffett once said so. The so-called money mind refers to believing in common sense, believing in compound interest, being cautious and rational, thinking independently, prioritizing security over return, not dealing with people with questionable character, not easily guaranteeing for others, not believing in windfall profits, and not trying to cross legal norms for extra benefits. In today's world of ubiquitous information, everyone's wealth may become the "prey" of those with ulterior motives. Only with the money mind, can one form good behavior habits and shield oneself from separating from one's wealth. Do not entrust your wealth easily. Wealth is easy to lose but hard to accumulate, and trust is a vital reason leading to the rapid loss of wealth. "Do not allow anyone else to manage your business unless you can watch their every move closely and understand their behavior; or you have strong reasons to believe in their character and ability. For investors, this criterion determines when you can let someone else make investment decisions for you." Graham's criterion written eighty years ago is so clear. Almost all the investors who lost their wealth in the financial products have violated the above two criteria. They did not have the ability to closely supervise the whereabouts of their funds, nor did they have sufficient reasons to believe in the character of the product issuers. They easily invested their own wealth solely based on others' glib tongue and a piece of commitment paper. They did not act as gatekeepers of their own wealth and ended up with nothing left even if the government punished the wrongdoers. "An ounce of prevention is worth a pound of cure." This is a phrase Munger often says. Destiny must be in one's own hands, and investors with a suitable money mind will try their best to find suspicious points in their investments to protect the safety of their principal. For example, whether the manager is trustworthy, whether the underlying assets are profitable, whether oneself can timely monitor the risks in the investment process, and whether the sales staff is obtaining large commissions. As long as any unreliable signs are found, these investors firmly will not invest their money. Do not desire to get rich quick. As in the capital market and anywhere else, making money is not easy, and desiring to get rich quick will lead to quick loss of wealth. In the capital market, the desire to get rich quickly often leads to investors over-allocating specific stocks, industries, or assets at the worst time. For example, buying high-risk stocks that can gain huge returns once an adventure succeeds, but the chance of success is very small, also known as "whispering stocks" by legendary fund manager Peter Lynch. "They often tell investors a story with explosive effects. These 'whispering stocks' have a hypnotic effect on people, and it is easy for you to believe that the story the company tells has an emotional appeal that can easily confuse you." This is like hearing a very tempting "sizzling" sound, making you salivate, but you did not notice that there is no steak on the grill. In the eyes of investors who lack the money mind, stable yield provided by blue chips such as China Yangtze Power cannot meet their demands. However, historical experience clearly shows that buying stocks lacking in safety solely based on imagined high yields is unwise. The long-term average investment return of general stocks is 9%-10%, which is also the average investment return of stock indexes in history, a benchmark to measure one's investment performance and the benchmark to measure fund investment performance.
Author: Zhou Le.

Early on October 15th Beijing time, one of the most influential officials of the Federal Reserve, Governor Christopher Waller, stated in his latest speech that future rate cuts by the Federal Reserve will require "more caution." Waller hinted that the future rate cuts will be smaller than the significant cuts in September. This statement further increases the probability of a 25 basis point rate cut by the Federal Reserve in November.

Neil Kashkari, a voting member of the FOMC and President of the Minneapolis Fed, also indicated in his latest speech that with the 2% inflation target approaching, the Federal Reserve may further moderately cut rates in the coming quarters in 2026.

According to CME's "FedWatch," the probability of a 25 basis point rate cut by the Fed in November is 95.6%, with a 4.4% probability of maintaining rates unchanged; the probability of a cumulative 50 basis point cut by December is 84.1%. This implies that futures traders are betting on the Fed cutting rates by 25 basis points at the November and December meetings.

In the market, the three major US stock indexes collectively closed higher, with the Nasdaq up 0.87%, the S&P 500 up 0.77%, and the Dow up 0.47%. The S&P 500 and the Dow both hit new historical highs, while the Nasdaq reached a new high in about 3 months. Most large technology stocks rose, with Nvidia up over 2%, reaching a new record high in closing price; Apple and Google rose by over 1%, while Microsoft, Tesla, and Meta saw slight gains. China concept stocks mostly fell, with the Nasdaq Golden Dragon China Index down 2.09%.

The Federal Reserve made a significant statement.

On the morning of October 15th Beijing time, Federal Reserve Governor Walle delivered a speech stating that future rate cuts will need to be "more cautious". Walle suggested that the magnitude of future rate cuts will be smaller than the sharp rate cut in September.

Speaking at a conference at Stanford University, Walle said, "I believe the overall data indicates that monetary policy should proceed with rate cuts more cautiously rather than as rapidly as in the September meeting. Regardless of recent developments, my fundamental view remains that policy rates will gradually decrease next year."

Walle pointed out that current economic data allow the Federal Reserve to reduce rates at an "appropriate pace" until reaching the neutral rate. As long as rates remain above the neutral level, it means the Federal Reserve has significant room for rate cuts.

Walle stated that the U.S. job market has slowed somewhat but remains fairly healthy, the labor market is fundamentally balanced, the unemployment rate may rise slightly but could still maintain historically low levels. However, he anticipates that due to hurricanes and strikes, the U.S. may lose 100,000 non-farm payroll jobs in October.

Regarding the U.S. inflation outlook, Walle stated that private sector forecasts predict that the Personal Consumption Expenditures (PCE) price index will rise in September, which is not a welcomed development. Whether this month's inflation data is just noise or signals a sustained increase in inflation remains to be seen. The FOMC's inflation target is a long-term average of 2%, but there are reasons to believe that future price hikes may be moderate.

Walle pointed out that recently released upward revisions in GDI, increased job vacancies, high GDP growth forecasts, strong employment reports, and higher-than-expected CPI reports indicate that the U.S. economy may not be slowing down as expected. It is expected that GDP will grow more rapidly in the second half of 2024.

In terms of future rate cut prospects, Walle stated, "Regardless of recent developments, my basic expectation remains to gradually lower policy rates next year. The median forecast of FOMC participants is for rates to be 3.4% by the end of 2025, so most colleagues also expect a gradual reduction in policy accommodation next year. The final policy target, however, remains uncertain."

Walle emphasized that he will closely monitor the inflation, labor market, and economic activity data released before the next meeting to see if these data confirm or contradict his inclination towards a more cautious approach to monetary policy easing.

"Further moderate interest rate cuts."

On the same day, Neel Kashkari, FOMC voter and President of the Minneapolis Fed in 2026, also stated in a speech that with the 2% inflation target about to be achieved, the Federal Reserve may further moderately cut interest rates in the coming quarters.

Kashkari emphasized that the future path of policy will be driven by actual economic, inflation, and labor market data. Currently, the federal funds rate is between 4.75% and 5%, this monetary policy stance still restrains growth, but the extent is not yet clear.

Kashkari pointed out that the Federal Reserve has made significant progress in terms of inflation, positioning the Fed in the final stages of bringing inflation down to the 2% target. A wealth of evidence suggests that US inflation will further decline. Recent strong employment market data indicates that the labor market remains robust with no imminent signs of rapid slowdown.

In weighing the feasibility of further reducing the interest rate target, the Federal Reserve is considering how much rates can be lowered in the context of slowing price pressures and a still robust economy. This indicates that the Fed will closely monitor changes in economic data when formulating monetary policy to ensure the achievement of the inflation target and a balance in economic growth.

Kashkari previously expressed satisfaction with the Fed's 50 basis point rate cut in September, stating that cutting rates by 0.25% at each of the remaining two meetings this year is a "reasonable starting point."

Kashkari also mentioned that if U.S. debt continues to expand, the neutral interest rate will also rise.

According to CME's "FedWatch," the probability of a 25 basis point cut by the Fed in November is 95.6%, with a 4.4% chance of keeping the current rate unchanged. The cumulative probability of a 25-basis-point cut by December is 15.4%, while the probabilities for 50, 75, and 100 basis point cuts are 84.1%, 0%, and 0% respectively.

This implies that futures traders are betting that the Federal Reserve will cut interest rates by 25 basis points at the November and December monetary policy meetings.

Goldman Sachs expects that the U.S. Department of Commerce will report a 2.04% annualized Personal Consumption Expenditures (PCE) price index for September later this month.

If Goldman Sachs' forecast is correct, this figure will be rounded to 2%, aligning with the Federal Reserve's long-term target. The Federal Reserve tends to use PCE as its inflation gauge, although it is not the sole data on which it relies.

Additionally, the Cleveland Fed's 'Inflation Near-term Predictor' dashboard also projects that the overall PCE annual rate for September will be 2.06%, rounded to 2.1%.

Editor/rice