The Fed is caught in a policy dilemma: cutting interest rates leads to dumping, and December will be the true turning point.

The market has been confusing for people these past two weeks: the Fed finally lowered interest rates by 25 basis points to 3.75%-4.00% on October 29, which should have been a favourable signal, but Powell immediately followed up with, “We'll see if we lower it again in December,” causing the three major U.S. stock indices to plummet. What logic is that?

What is happening in the market now?

The core issue is not the interest rate cut itself, but the sharp deterioration of monetary liquidity:

• Liquidity is drying up: Liquidity in the U.S. money market is disappearing at an unprecedented rate, which is often a signal before a plummet.
• The government shutdown is not over yet: The record-breaking shutdown continues to fester, with reduced government spending further lowering liquidity.
• Powell himself is in a mess: he talks about weak employment when lowering interest rates, but emphasizes inflation when refusing to lower them, leaving the market confused.
• Tech stocks are the first to be hit: When liquidity tightens, the tech stocks with the most bubbles become the first cannon fodder.

What is Wall Street betting on now?

Waiting for the Fed to temporarily inject funds into the market on the Treasury settlement date or important payment nodes. This is the countdown to market rescue.

Key look at December

The Fed's interest rate meeting in December will determine the upcoming market landscape. Whether to cut or not, a slight difference could lead to a rebound or continued plummet. We are now at a crossroads of policy and financial system stability.