Core Insights - The discussion around the Federal Reserve's potential interest rate cuts has intensified, with many investors focusing on the implications for the US dollar's exchange rate. However, the relationship between interest rate cuts and currency depreciation is more complex than it appears [1][3]. Group 1: Nature of Interest Rate Cuts - The simplistic view that "lower rates lead to a weaker dollar" must be abandoned. The impact of Fed rate cuts on the dollar depends on whether the cuts are "preventive" or "recessionary" in nature [3]. - Preventive rate cuts are proactive measures taken to extend economic expansion and manage risks, often leading to increased market confidence and potentially strengthening the dollar [3][4]. - Recessionary rate cuts occur in response to clear signs of economic distress, which can heighten market fears and lead to a flight to safety, often resulting in increased demand for US dollar assets despite the theoretical negative impact on the dollar [4]. Group 2: Global Economic Interconnections - The interconnectedness of the global economy means that fluctuations in major economies can have ripple effects. For instance, the 2008 financial crisis highlighted how US economic issues can impact global markets [6]. - China's economic transitions and policy adjustments also have significant global implications, affecting demand for commodities and influencing international markets [6][8]. - The US dollar's status as the world's reserve currency amplifies the effects of its monetary policy on global financial markets, making it crucial for investors to understand these dynamics [8]. Group 3: Future Market Considerations - Investors should focus on the underlying health of the US economy, analyzing key indicators such as employment, inflation, and consumption to determine the nature of any rate cuts [9]. - Acknowledging the "new normal" for the Chinese yuan, characterized by stability and two-way fluctuations, is essential for understanding its future trajectory in the context of global economic changes [10]. - The interdependence of global economies necessitates a comprehensive perspective and dynamic analytical framework to navigate the complexities of the financial markets [10].

Report Industry Investment Rating - The investment view is "shockingly weak" [1][2] Core Viewpoints of the Report - The international policy is loose but highly uncertain, while the domestic policy aims for stable growth but the domestic demand momentum needs to be released. The inflation pressure in the US has not completely subsided, and the market bets on further interest rate cuts by the end of the year, but the risk of "recessionary interest rate cuts" should be vigilant. There are still differences in the Sino-US tariff negotiations. In May 2025, some additional tariffs were cancelled, but the US has not clearly adjusted the 20% tariff related to "fentanyl" and the 10% basic tariff, and there are still significant variables in the later stage. Domestically, the official has introduced a series of economic stabilization policies, and the market expects a possible interest rate cut and reserve requirement ratio cut in the fourth quarter; the capital activity has increased marginally, but the domestic demand policy still needs to be strengthened [5][64]. - Globally, the cotton production in the 2025/26 season has been increased month-on-month, with China, India, and Australia being the main sources of incremental production, offsetting the production cuts in some regions. The US production has slightly increased, but there is a risk of a downward revision of the unit yield due to the drought in the main producing areas. The global ending inventory has dropped to the lowest in nearly four years, the inventory-consumption ratio has decreased, and the supply and demand have shifted to a tight balance. The trade flow has been restructured due to Sino-US frictions, and China has reduced its purchase of US cotton and shifted to other cotton-producing countries. Domestically, the cotton planting area in Xinjiang has increased year-on-year, and the sufficient accumulated temperature has helped to improve the unit yield. The total production is expected to increase significantly, the harvest time is advanced, the pre-sale volume of new cotton has increased significantly, and the hedging position has moved forward, suppressing the short-term supply elasticity. The risk preference of ginning factories has dropped to a low level due to continuous losses, the effective production capacity has been reduced, the shortage pattern of seed cotton has reversed, and at the same time, the port and industrial and commercial inventories are running at a low level, the import volume has shrunk, and the domestic supply is more dependent on new cotton. There is a game between cotton farmers and ginning factories regarding the opening price [5][68]. - Global consumption has been slightly adjusted upward but shows significant differentiation. China's "Golden September and Silver October" peak season has driven consumption growth, while countries such as Turkey and Pakistan have dragged down the global demand recovery due to weak textile exports. The import of textiles and clothing in Europe and the US has improved marginally, but the inventories of wholesalers are at a high level and the willingness to replenish stocks is weak. The orders of processing countries in Southeast Asia are mainly short-term orders, and there is a shortage of long-term orders. Domestically, the characteristics of the "Golden September and Silver October" peak season are not significant. Although the operating rate of textile enterprises has rebounded, it is still lower than the same period in previous years. The order increment is limited and mainly consists of small and short-term orders. The inventories of yarn, grey cloth, and textile enterprise raw materials have been continuously reduced but are still at a high level in the same period. Textile enterprises have a low willingness to actively stock up due to profit losses (cash flow losses for inland enterprises and small profits for Xinjiang enterprises). Exports show the characteristic of "trading volume for price", and the proportion of exports to emerging markets has increased to offset the decline in demand from Europe and the US [5][68]. Summary by Relevant Catalogs 1. Market Review - In the third quarter, the Zhengzhou cotton futures generally showed a volatile trend of "rising first and then falling". In July, the domestic planting area increased in the new year, and the weather conditions were generally favorable for cotton growth. The market was optimistic about the later production, but the old crop inventory was low, and at the same time, the downstream production capacity was excessive. The old crop basis was running at a high level, which supported the Zhengzhou cotton price. The Zhengzhou cotton ran strongly to 14,200 - 14,300 yuan/ton. For US cotton, although some producing areas encountered certain weather problems, the overall impact was limited, and the market's expectation of US cotton production was still relatively stable. The price fluctuated between 67 - 68 cents/pound [6]. - In August, as the new cotton in the Northern Hemisphere entered the critical growth stage, the impact of weather factors on the market became more significant. The weather in the Xinjiang production area in China was good, and the expectation of a bumper harvest of Xinjiang cotton increased. At the same time, the near-month Zhengzhou cotton continued to reduce its positions and decline, reflecting that the real willingness of long - term funds to take delivery was relatively low. In the US, continuous drought weather occurred in some main cotton - producing areas, resulting in a decrease in the good - quality rate of US cotton. However, due to market concerns that the Sino - US tariff negotiations would fall short of expectations, leading to continued sluggish exports of new crops, the US cotton price still maintained a volatile and weak operation [6]. - In September, as the new cotton was approaching the market, the game among all parties in the market intensified. At the macro level, the domestic introduced a series of economic stabilization policies, which boosted the sentiment of the commodity market. Driven by the positive market sentiment, the Zhengzhou cotton rushed up to near the previous high again, but due to the gradual listing of new cotton and the less - than - expected recovery of orders from downstream textile enterprises, the Zhengzhou cotton fell again. At the end of the month, the price of the main contract closed at 13,600 - 13,700 yuan/ton. For US cotton, as the new cotton began to be harvested one after another, the market's expectation of production gradually became clear. Although there was some production reduction due to previous weather problems, the demand side was still weak. The US cotton price fluctuated and fell after rushing up, and the price of the main contract closed at around 69 cents/pound at the end of the month [7]. 2. International Cotton Market 2.1 Global Trade Flow Reconstruction - In the 2025/26 season, the global cotton production increased by more than 230,000 tons month - on - month to 25.62 million tons. The main sources of incremental production were China, India, and Australia. The global cotton consumption increased by 180,000 tons month - on - month to 25.87 million tons, mainly driven by the recovery of consumption in China. The global cotton trade volume increased by 20,000 tons month - on - month. India and Australia were the main sources of export increment, and Vietnam and Turkey were the main sources of import increment. The global cotton trade generally maintained an expanding trend, but the Sino - US trade friction led to the gradual reconstruction of the global trade flow [13]. - Affected by the reduction of the initial inventory, the global cotton ending inventory decreased by nearly 170,000 tons month - on - month to 15.92 million tons, the lowest level in nearly four years. The global cotton inventory - consumption ratio dropped to 45%, down 1 percentage point month - on - month and 0.7 percentage points year - on - year, indicating that the global cotton "de - stocking" process continued, and the supply - demand pattern gradually switched from "loose" to "tight balance" [14]. 2.2 United States: Drought in Producing Areas and Obstructed Exports - In terms of new crop production, the USDA September supply - demand report showed that the estimated unit yield of US cotton in the 2025/26 season was 861 pounds/acre, down 1 pound/acre month - on - month, but the estimated harvest area was 7.37 million acres, up 10,000 acres month - on - month, resulting in a slight increase in the total production to 2.88 million tons, up 2,000 tons month - on - month. The adjustment of the unit yield was due to the continuous expansion of the drought area in the main US cotton - producing areas. As of September 16, 2025, about 41% of the US cotton - producing areas were affected by drought. As of September 22, 2025, the overall good - quality rate of US cotton plants was 52%, down 2 percentage points from the previous week [16][17]. - In terms of exports, from September 12 - 18, 2025, the export signing volume of US upland cotton in the 2025/26 season was 18,500 tons, down 54% from the previous week and the average level of the previous four weeks. The weekly export shipment volume was 31,100 tons, up 14% from the previous week and 6% from the average level of the previous four weeks. China continued to be absent from the new - season US cotton procurement. As of the week of September 18, 2025, the total sales progress of US upland cotton in the 2025/26 season was 7.7%, indicating that US cotton faced difficulties in the international market and its competitiveness needed to be improved [18]. - In terms of tariff negotiations, in May 2025, China and the US agreed to cancel the additional 91% tariffs imposed after April 2, but the US still had uncertainties in tariff policies. The market expected that the possibility of reducing the 10% (basic reciprocal tariff) was low; the 20% fentanyl tariff was expected to be reduced, but the reduction range was not clear; the reduction range of the 24% additional reciprocal tariff also depended on the negotiation results of both sides [19]. 2.3 Brazil: Both Supply and Sales Increase - For the old crop, in the 2024/25 season, the cotton planting area in Brazil continued to expand, with the national cotton planting area reaching about 2.09 million hectares, a year - on - year increase of 155,000 hectares (+7.3%). The average unit yield was 1,887 kg/hectare (-0.9%), equivalent to 125.8 kg/mu. Driven by the large increase in area, the total cotton production in Brazil in the 2024/25 season reached 3.94 million tons, a year - on - year increase of 233,000 tons (+6.3%), setting a new historical record [37]. - For the new crop, it is predicted that the cotton planting area in Brazil will be 2.14 million hectares, a year - on - year increase of 10.3%, and the output is expected to be 3.96 million tons, a year - on - year increase of 7%. The average unit yield is 1,849 kg/hectare, a year - on - year decrease of 2.9%. The main risk to the new - crop unit yield comes from the uncertainty of climate conditions. In the 2024/25 season, Brazil's total cotton exports reached 2.83 million tons, a year - on - year increase of 5.8%, making it the world's largest cotton exporter again. As of mid - September 2025, the pre - sale progress of Brazil's 2025/26 season cotton had reached 26% [40]. 2.4 India: Production Increases and Demand Stabilizes - In terms of production, the USDA latest report estimated that the cotton production in India in the 2025/26 season would be 4.16 million bales, with a planting area of 11.2 million hectares and a unit yield of 372 kg/hectare. The CAI predicted that the new - crop unit yield would increase by about 10% [42]. - In terms of imports, as of July 2025, the cumulative cotton import volume of India in the 2024/25 season (2024.8 - 2025.7) was 604,000 tons, a year - on - year increase of 284.5%, at a historical high. The CAI latest supply - demand data adjusted the cotton import volume of India in the 2024/25 season to 3.9 million bales [42][43]. - In terms of exports, the USDA September report showed that the cotton export of India in the 2024/25 season decreased by 40,000 tons month - on - month to 280,000 tons, a year - on - year decrease of 220,000 tons. The CAI estimated that the export in the 2024/25 season would be 1.8 million bales, lower than 2.836 million bales in the 2023/24 season. The export destinations were still concentrated in Southeast Asia, but the shares of major countries such as Bangladesh, Vietnam, and China all declined significantly [43]. - In terms of domestic consumption, the CAI estimated that as of the end of August 2025, the domestic cotton consumption in India in the 2024/25 season was 5.34 million tons, basically the same month - on - month and year - on - year [43]. 2.5 Southeast Asia: Total Volume Increases Steadily and Structure Differs - Southeast Asia has become the core destination for the transfer of global cotton spinning production capacity. Affected by the 50% tariff imposed by the US on Indian goods, a large number of Indian cotton product orders have been transferred to Southeast Asia. Vietnam, Bangladesh and other countries' yarn mills' cotton consumption demand has increased significantly. Vietnam has an advantage in tariff competition in the European and American markets and has become the preferred destination for export - oriented orders [45]. - Southeast Asia itself lacks cotton production and depends entirely on imports for raw materials. In the 2025/26 season, the cotton planting area in Pakistan is expected to be 1.85 million hectares, a decrease of 7.5% from the previous year. The output is predicted to be adjusted down to 1.05 million tons, a year - on - year decrease of 4% [46][47]. 3. Domestic Cotton Market 3.1 Supply: High Pressure from New Crops - For the old crop inventory, as of August 31, 2025, the total national social cotton inventory was 2.37 million tons, including 890,000 tons of industrial inventory and 1.48 million tons of commercial inventory, a year - on - year decrease of 13.5% and 14.0% respectively, significantly lower than 3 million tons in the same period in 2024. After entering September, the pace of old - crop inventory depletion slowed down slightly but remained at a low level. Spot transactions were dull, and textile enterprises mainly made rigid purchases [49]. - For the new crop output, in terms of area, according to the data of the National Cotton Market Monitoring System in July 2025, the national actual cotton sown area was 45.803 million mu, a year - on - year increase of 6.3%; among them, the actual sown area in the Xinjiang cotton area was 43.58 million mu, a year - on - year increase of 8.2%. In terms of unit yield, the comprehensive climate from sowing to boll - opening in the Xinjiang cotton area was suitable. The China Cotton Association data showed that the estimated unit yield of Xinjiang cotton in 2025 was 169 kg/mu, a year - on - year increase of 5.7%. Market institutions estimated that the output range was between 7.08 - 7.7 million tons [49][50]. - In terms of imports, since 2025, the domestic cotton import volume has decreased significantly year - on - year. From January to July 2025, the cumulative imported cotton was 513,100 tons, a year - on - year decrease of 74.3%. It may increase slightly from September to December due to the implementation of processing trade quotas, but it will still be relatively stable throughout the year [50]. 3.2 Demand: High and Stable in Xinjiang, Differentiated in Inland Areas - The operating rate of domestic yarn mills shows a pattern of "high and stable in Xinjiang, differentiated in inland areas". The operating rate of Xinjiang yarn mills is significantly better than that of inland areas. Since 2025, the operating rate of large - scale yarn mills in Xinjiang has been stable in the range of 80% - 90%. From the raw material end, the expected local cotton output in Xinjiang is sufficient, and yarn mills can purchase nearby, which not only has a stable supply but also saves long - distance transportation costs. From the industrial environment, in recent years, Xinjiang has continuously increased its support for the textile industry, and the policy dividends have attracted a large amount of investment [55]. - The demand for cotton in inland yarn mills shows a differentiated pattern of "stable for leading enterprises, sluggish for small and medium - sized enterprises", and the overall demand is weaker than that in Xinjiang. Large - scale inland yarn mills have relatively stable demand for cotton procurement, while small and medium - sized yarn mills face multiple operating pressures. On the one hand, the terminal consumer market demand is weak, and it is difficult to obtain orders, and most of them are small and short - term orders. On the other hand, the costs of raw material procurement, labor, transportation, etc. continue to rise, and the profit space of enterprises is compressed. Some enterprises have tight cash flow, and the operating rate can only be maintained at 50% - 60%, and there are even intermittent shutdown situations [56][57].

Core Viewpoint - The A-share and Hong Kong stock markets continue to exhibit "volatile differentiation + internal rotation of technology style," with capital preference focusing on power equipment, non-ferrous metals, and electronics sectors [1][4] Economic Environment - The U.S. August core PCE data did not show significant inflationary pressure, increasing market bets on two more rate cuts by the Federal Reserve this year [1][18] - The "Great American Rescue Plan" is expected to gradually take effect in the second half of the year, alongside fiscal and monetary expansion in Europe, which may boost global demand recovery [1][11] Industry Performance - The technology-related overseas sectors are performing strongly due to ongoing capital expenditure expansion related to AI, while traditional manufacturing and consumption sectors are relatively weak due to high interest rates suppressing demand [2][8] - The A-share and Hong Kong markets are seeing a rotation in capital towards sectors with clear improvement in profitability, such as power equipment and non-ferrous metals [4][6] Investment Opportunities - The AI sector remains a mid-term industry prosperity mainline, with potential for short-term trading adjustments as valuations digest [3][18] - Key areas to watch include battery, engineering machinery, and the anti-involution price increase chain (express delivery, breeding, fiberglass) [3][18] - The overseas capital goods chain is worth early-stage exploration, particularly in non-ferrous metals, engineering machinery, and petrochemicals [3][18] Market Trends - Historical analysis shows that after the Fed resumes rate cuts, improvements in the U.S. job market often lag, while PMI and CPI rebound more quickly [14][18] - The current high interest rate environment is expected to gradually improve housing mortgage rates and corporate financing rates, potentially leading to a recovery in the real estate sector and traditional industry investment willingness [11][18]

Group 1: Commodity Market Overview - The commodity market is experiencing a range-bound fluctuation in Q3 2025, with prices significantly higher than in Q2. Precious metals, particularly gold, have performed exceptionally well, reaching historical highs, while basic metals like copper remain strong. The energy sector, however, is underperforming due to oversupply [1] - Looking ahead to Q4, the absence of recession signs in the US economy and the Federal Reserve's risk management-style interest rate cuts are expected to positively impact commodity price rebounds. Expansionary fiscal policies in the US and Europe are likely to boost overall demand [1] Group 2: Federal Reserve's Interest Rate Decisions - On September 18, the Federal Reserve lowered the federal funds rate by 25 basis points to a target range of 4.00% to 4.25%. This move is characterized as a risk management-style cut, essentially a preventive measure against potential economic downturns [2] - Despite some signs of economic weakening, the US economy has not entered a recession, with retail sales data showing a 0.6% month-on-month increase in August, marking three consecutive months of growth [2] - The Fed's recent statements indicate a more pessimistic view on the labor market, acknowledging a slowdown in job growth and a slight increase in the unemployment rate, while also raising inflation expectations for 2026 [2][5] Group 3: Historical Context of Interest Rate Cuts - Since 1982, the Federal Reserve has undergone seven major interest rate cut cycles, categorized into preventive and recessionary cuts. Typically, preventive cuts benefit precious metals and US equities, while recessionary cuts tend to negatively impact equities but favor gold prices [3] - The price movements of copper and crude oil are significantly influenced by the state of the real economy and demand for these commodities [3] Group 4: Domestic Economic Indicators - Recent macroeconomic data from China indicates a dual weakness in supply and demand, with industrial value-added growth slowing to 5.2% year-on-year in August. Exports also saw a decline, with a -0.4% year-on-year change, marking the first negative growth of the year [7] - Despite the slowdown in traditional industries, high-tech sectors continue to show resilience, with a 9.3% year-on-year growth in high-tech industrial value-added [7] Group 5: Policy Measures and Market Outlook - The frequency of new policy measures in China is increasing, focusing on market reforms, expanding service consumption, and local government debt management. These measures are expected to support growth in Q4 [8] - A potential global shift towards a new phase of monetary easing and fiscal stimulus could benefit commodity prices, although oil and agricultural products may underperform due to supply expansions and tariff impacts [8]

Group 1: Gold Market - Gold prices are approaching the $3,800 mark, but short-term risks are increasing, indicating a potential for a significant pullback [2] - The Federal Reserve officials have been vocal about the possibility of interest rate cuts, with Chairman Powell suggesting that further cuts may be warranted if labor market weakness outweighs inflation concerns [2] - Analyst Peng Cheng from Zhisheng Research believes that continuous rate cuts this year are likely, which would weaken the dollar and benefit gold [2] Group 2: Oil Market - Oil prices experienced a significant rebound but remain weak overall, with recent geopolitical conflicts failing to provide substantial support [4] - Ongoing negotiations regarding Iran have not progressed, and the potential reinstatement of sanctions by the UN on September 27 is unlikely to impact global oil supply significantly [4] - The technical outlook for oil shows a bearish trend, with a daily candlestick pattern indicating continued volatility and a potential short-term downtrend [4] Group 3: Copper Market - Copper prices showed a slight increase but with weak momentum, indicating a potential downward trend in the short term [6] Group 4: Nikkei 225 Index - The Nikkei 225 index has been closing with small gains but may be nearing a peak, with short-term upward movement expected to be limited [7]

Core Viewpoint - The recent Federal Reserve interest rate cuts have not led to a significant decline in long-term U.S. Treasury yields, which is contrary to historical trends where such cuts typically result in lower yields [1][3][12]. Group 1: Historical Context - Over the past 50 years, there have been 12 interest rate cut cycles, which can be categorized into two distinct types: "preventive rate cuts" and "recessionary rate cuts" [3][6]. - Preventive rate cuts, such as those in 1995 and 2019, occur before economic downturns and typically result in smaller, short-lived declines in 10-year Treasury yields, averaging a drop of 167 basis points [6][7]. - Recessionary rate cuts, like those during the 2007 financial crisis, are more aggressive and prolonged, leading to larger declines in yields, but the rebound in rates occurs much later [7][9]. Group 2: Current Market Dynamics - The current situation is influenced by three main factors that are hindering the expected decline in long-term yields: limited rate cut capacity, rising term premiums, and reduced foreign investment demand [12][21]. - The long-term neutral interest rate in the U.S. has increased to 3%-3.5%, limiting the number of potential rate cuts to about 3-4 times, while the market anticipates 4-5 cuts [13][15]. - The term premium, which compensates for the risks of holding long-term bonds, has risen from negative to 0.9%, partly due to a significant increase in Treasury issuance [17][19]. - Foreign investors, particularly from Japan and Europe, are less inclined to purchase U.S. Treasuries due to competitive yields in their own markets, which diminishes demand for U.S. debt [19][21]. Group 3: Future Outlook - The outlook for U.S. Treasury yields suggests a likelihood of narrow fluctuations, with limited potential for significant declines or sharp increases [21][22]. - Key indicators to watch include the downward potential of yields, which may be constrained by the neutral rate and weak foreign demand, and the upward risks associated with increased political intervention and inflation pressures [23][24]. - Investors should focus on two critical timeframes: the outcomes of the upcoming rate cuts and the early 2024 Treasury issuance plans, as these will directly influence the term premium [27][28].

Gold - The recent fluctuations in gold prices were influenced by the Federal Reserve's interest rate decisions, with expectations of potential rate cuts leading to a recovery in gold prices after an initial drop [2] - New Federal Reserve Governor Milan indicated that a 50 basis point cut is appropriate, suggesting a consensus among officials regarding rate cuts, which may intensify the ongoing conflict between Trump and the Fed [2] - If the Fed cuts rates in the next two meetings, it could signal a recessionary rate cut, increasing market risk aversion and benefiting gold [2] - Technically, gold's daily chart shows a bullish reversal, with support at $3666 [2] Oil - Oil prices experienced a downward trend despite previous rebounds, with market sentiment potentially affected by new sanctions against Russia from the EU [4] - The EU's upcoming sanctions aim to target key aspects of the global oil industry, including reducing Russian oil exports and limiting Indian imports of Russian oil [4] - The number of shadow tankers under EU sanctions has exceeded 560, with a price cap on Russian oil set at $47.6 per barrel [4] - Technically, oil's daily chart shows three consecutive bearish candles, indicating a potential end to the recent rebound, with resistance at $63.50 [7] Copper - Copper's daily chart shows a slight bullish trend, but the momentum is weak, making it difficult to change the current market structure [5] - The 4-hour chart indicates significant support from long-term moving averages, with a key level to watch at $4.58; if surpassed, it may target $4.65 [5] Nikkei 225 - The Nikkei 225 index's daily chart shows a hanging man candlestick pattern, indicating severe overbought conditions and a potential market top [6] - The 1-hour chart suggests that the upward structure has completed, with a high likelihood of a descending ABC pattern forming, and resistance at 45600 should be monitored [6]

Group 1 - The market experienced a decline last week, with the CSI 300 index down by 0.44%, the Shanghai Composite Index down by 1.30%, and the CSI 500 index up by 0.32% [3] - Economic data for August was below market expectations, with weak production, consumption, and new housing sales data [3] - The recent economic performance in China has been significantly impacted by declining exports, with real estate sales in first-tier cities continuing to decline [3][4] Group 2 - The technical market features indicate a significant shift in capital allocation, with the financial sector becoming a major variable in the index decline, while the technology sector has absorbed funds from the financial sector [4] - The recommendation for the main board is to reduce positions to a low level and focus on avoiding risks, as the market is expected to revert to mean levels [4] - The small-cap sector showed stronger performance than the main board but is likely supported by speculative funds, suggesting a reduction in positions to a low level [4][5]

Group 1 - The Federal Reserve has restarted interest rate cuts, with the 10-year U.S. Treasury yield briefly falling below 4.0% [1][3] - Since the early 1970s, the Federal Reserve has experienced 12 interest rate cut cycles, with 5 occurring in a soft landing environment and 7 in a hard landing context [5][6] - In soft landing scenarios, the average interest rate cut is about 234 basis points (bps) over an average duration of 9 months, while in hard landing scenarios, the average cut is 647 bps over 20 months [5][6] Group 2 - The macroeconomic conditions determine the slope and space of the decline in U.S. Treasury yields, with preventive cuts resulting in smaller declines and earlier rebounds [2][27] - The low point of the 10-year Treasury yield often occurs 1-2 months before or after the last rate cut in preventive cut scenarios [28][75] - The timing of the low point in Treasury yields is closely related to the pace of interest rate cuts, with faster cuts leading to earlier lows [2][75] Group 3 - Despite the restart of interest rate cuts, the potential for further declines in the 10-year Treasury yield may be limited due to the rise in the long-term nominal neutral interest rate to the 3-3.5% range [3][50] - The market has priced in 4-5 rate cuts by the end of 2026, but the Federal Reserve may only cut rates once if the PCE inflation is projected at 2.6% and unemployment at 4.4% [3][50] - The increase in term premium is expected to dominate the direction of long-term Treasury yields, with the term premium rising to around 0.9% in 2025 due to expanded debt supply and policy uncertainty [3][56]

Core Viewpoint - The article analyzes the performance of copper prices during the Federal Reserve's interest rate cut cycles since 1989, highlighting that copper price movements are influenced by market expectations formed after rate cuts and the fundamental supply-demand dynamics of copper itself [3][4]. Group 1: Federal Reserve Rate Cut Cycle Overview - Since 1989, including the upcoming cycle starting in 2024, the Federal Reserve has initiated a total of seven rate cut cycles, each with distinct macroeconomic backgrounds and impacts [4][5]. - The rate cut cycles can be categorized into three types: preventive cuts, recessionary cuts, and emergency cuts, each differing in their triggers, paths, and outcomes [5][6]. Group 2: Copper Price Performance Analysis - The analysis of copper price performance before and after the first rate cut reveals that copper prices tend to be strong in the 4-8 months leading up to the cut, but weaken in the last 4 months before the cut [7]. - During the rate cut cycle, copper prices do not show a clear trend, fluctuating due to changing market expectations regarding economic recovery [9][12]. - After the last rate cut, copper prices exhibit more significant trends, often rising sharply as market expectations shift following the completion of the rate cuts [12][15]. Group 3: Conclusions and Future Outlook - The Federal Reserve's rate cut actions do not directly dictate copper price movements; instead, prices are primarily driven by market expectations and the fundamental supply-demand balance [15][17]. - The most favorable macroeconomic scenario for copper prices is characterized by a "weak but not declining" U.S. economy combined with improving rate cut expectations, which could lead to further price increases if inflation and employment data support the Fed's rate cut outlook [17].