Why a Fed rate cut generally signifies a bull run

Why does everyone shout that a bull run is coming when the Fed cuts interest rates?
In fact, this logic is not complicated; to put it simply, it can be summarized in one sentence: if money is too cheap, it won't just lie quietly in the bank.
Think about it, what does the Fed lowering interest rates mean? It means that if you keep your money in the bank, the interest you receive will be lower, and you may not even keep up with inflation. Large amounts of capital will be reluctant to stay in the bank and must seek out places with higher returns. At this time, there are not many places in the U.S. that can absorb such huge amounts of capital—manufacturing has already been hollowed out in recent years, with high risks and low returns, which simply cannot accommodate this capital.
So naturally, funds flow into the US stock market. The US stock market is a "wealth amplifier"; the more money that comes in, the more it rises, and as it rises, it creates more paper wealth, which in turn attracts more funds. Thus, a cycle of "liquidity push-up" emerges, leading to a prosperous stock market.
The risk appetite sentiment in the stock market will again follow the financial system and directly transmit to the crypto space. The crypto space itself has no fundamentals; it relies solely on sentiment and liquidity. Once the US stock market gains momentum and investor confidence rises, speculative capital will flood in, and crypto assets will naturally rise.
Conversely, if the Fed raises interest rates, the interest rates go up, making it very lucrative to keep money in the bank, and there is no need to take risks by investing in stocks or cryptocurrencies. The result is that a large amount of capital flows back into the banking system, causing the stock market to decline in water level, and lacking incremental funds, it naturally becomes easy to drop.
This is the basic principle of "interest rates and the inverse relationship with risk asset prices" mentioned in textbooks.
But—here's the key point—the real world is not always a textbook.
For example, in the past few years, even though the Fed has been continuously raising interest rates, the US stock market continues to rise without stopping, which clearly contradicts common sense. What does this indicate? It indicates that someone is "supporting the market," and there is an invisible hand intervening.
How to determine if this intervention exists? Just look at another anomaly: government bonds.
While the Fed is raising interest rates, the U.S. Treasury is continuously and wildly expanding national debt. For every additional dollar of national debt issued, it is equivalent to the U.S. injecting another dollar into its own domestic economy.
In other words, the Fed's right hand is withdrawing liquidity by raising interest rates to tighten the US dollar; however, the Treasury's left hand is injecting liquidity back into the market by issuing government bonds. The result is that, although the amount of liquid funds in the US should theoretically decrease, it has not decreased in practice and has even increased.
It's like that bizarre math problem we did as kids: water is being drained from the bottom of a pool while water is being added from the top, asking when the pool will be full. Everyone thinks this question is unreasonable; it can't be done like that in reality. But the U.S. is doing just that, and they're boldly justified in doing so.
Why do they take the risk of implementing this "interest rate hike + monetary easing" combination? The reason is not complicated.
The U.S. wants to use interest rate hikes to pull all the dollars in the world back to America, causing other countries to fall into crisis or even economic collapse due to a dollar shortage, which will make dollar assets more valuable, allowing the U.S. to harvest global wealth.
But at the same time, the United States cannot allow its own economy to collapse due to interest rate hikes. If all the funds are sucked into the banks, once liquidity breaks, the U.S. stock and real estate markets will crash first, and the world will be doomed before even reaping its own profits. So they are raising interest rates while frantically issuing government bonds to extend their own lives.
This is the reality we see: the global dollar is decreasing, but the dollar within the United States is increasing, and US stocks are rising instead of falling.
This set of operations looks like cheating, but in fact, it is the kind of maneuvering allowed within their system.
So, when you see the Fed announce a rate cut, the collective cheer from the market is actually because—money will become cheaper, more abundant, and more rampant. As long as money is sufficiently rampant, it will rush towards anything that can make a profit, pushing up the stock market, the crypto world, gold, and commodities.
This is why everyone says "lowering interest rates means a bull run" is the underlying logic. #美联储降息25个基点#