- The report analyzes the impact of Federal Reserve interest rate cuts on asset performance, focusing on "policy intensity, crisis severity, and market expectations" as core variables[2][5][21] - It categorizes interest rate cuts into "preventive cuts" and "responsive cuts," with preventive cuts being gradual and aimed at economic adjustment, while responsive cuts are crisis-driven and characterized by high intensity and rapid pace[4][14][21] - Historical data shows that during preventive rate cuts, risk assets perform well, while gold exhibits mixed results depending on inflation and geopolitical factors. In responsive rate cuts, gold becomes a key safe-haven asset during severe crises, while equity markets experience significant declines due to earnings collapses[5][21][30] - The report highlights specific periods of interest rate cuts, such as 1984-1986, 1995-1998, 2001-2003, and 2007-2008, analyzing their economic background, policy triggers, and asset performance[16][18][19][30] - During preventive rate cuts, slow-paced cuts align with economic recovery, benefiting growth stocks and stabilizing corporate earnings. Faster-paced preventive cuts may trigger market concerns, leading to mixed asset performance[29][30] - Responsive rate cuts during light crises are driven by liquidity restoration, leading to asset price recovery. In severe crises, earnings collapse dominates, resulting in equity market declines and gold price increases due to safe-haven demand[30][32] - Emergency responsive rate cuts, such as those in March 2020, caused widespread asset sell-offs due to liquidity squeezes, breaking the typical pattern of gold price increases during responsive cuts[31][32] - The report provides detailed statistics on asset performance during preventive 25BP rate cuts, showing average returns and win rates for major indices like S&P 500, Nasdaq, Hang Seng Index, Shanghai Composite, and gold across different timeframes[36][37][38] - Preventive 25BP rate cuts typically result in moderate equity market gains, with S&P 500 and Nasdaq showing strong performance, while gold exhibits steady inflation-hedging characteristics[36][38][39]

Core Insights - The article discusses the impact of Federal Reserve interest rate cuts on various asset classes, highlighting the differences between "relief" and "preventive" rate cuts [1][2] Group 1: Stock Market - Equity assets tend to perform better during preventive rate cuts, while they are likely to decline during relief rate cuts [1][2] - The winning rate of equities increases one month after preventive rate cuts, with performance during relief cuts being closely tied to fundamental recovery [2] Group 2: Bond Market - U.S. Treasury yields are more likely to decline during relief rate cuts, while their behavior during preventive cuts is uncertain [1][2] - After rate cuts, U.S. Treasury yields typically decrease, and domestic bond yields also tend to drop in the short term, with no clear pattern observed in German or Japanese bonds [2] Group 3: Currency Market - The dollar's performance is mixed in the early stages of rate cuts, but tends to depreciate two to three months after relief cuts, while it may appreciate during preventive cuts [1][2] - The Chinese yuan shows relative independence in its movements compared to the dollar, while the euro and yen generally appreciate [2] Group 4: Commodity Market - Gold tends to have a higher average increase during preventive rate cuts, and its price elasticity is greater during relief rate cuts [1][2] - The relationship between oil prices and interest rate cuts is weak, as oil prices are more influenced by supply and demand dynamics [1][2]

Group 1: Economic Trends - The stock market has shown strong performance since the beginning of the year, with small-cap indices leading the gains[2] - Industrial enterprise profits turned negative in May, with a year-on-year decline of 9.1%, marking the first negative result this year[4] - The Producer Price Index (PPI) has deepened its year-on-year decline, indicating increasing pressure from overcapacity in the industrial sector[4] Group 2: Credit Expansion and Asset Prices - Active credit expansion by commercial banks is driving asset price trends, with a notable increase in stock valuations and a decline in bond yields[10] - The growth of social financing has rebounded since the beginning of the year, indicating a supply-driven increase in credit rather than demand-driven[10] - The current trend in asset prices is expected to continue as regulatory authorities show a strong willingness to guide banks to increase credit supply amid slowing demand and low prices[10] Group 3: Risks and Future Outlook - Risks include geopolitical tensions and potential policy changes that could exceed expectations[3] - The ongoing low inflation environment and weak demand may lead to continued downward pressure on corporate profits, particularly in the third quarter[4] - The market anticipates three rate cuts by the Federal Reserve in 2025, with a total reduction of approximately 64 basis points[18]

Core Viewpoint - The article discusses the complexities and long-term nature of the China-U.S. trade friction from 2018 to 2019, highlighting its significant impact on asset prices and the sensitivity of markets to trade-related signals [1][3]. Summary by Sections Trade Friction Overview - The China-U.S. trade friction lasted nearly two years, experiencing four distinct periods of easing, each with varying durations and outcomes [1][2]. Asset Price Behavior - Three key patterns in asset price movements during the trade friction are identified: 1. Long-term asset price trends are primarily driven by fundamentals, with the Chinese stock market closely linked to domestic economic conditions [1][3]. 2. Markets react more sensitively to negative signals from trade negotiations, while responses to easing signals are relatively muted [1][3]. 3. Different asset classes exhibit varying sensitivities to trade friction, with stocks and currencies being more responsive compared to the bond market, which is influenced more by domestic policies and fundamentals [1][3]. Specific Easing Periods - **May 2018**: A joint statement was released, but the easing lasted only 10 days. U.S. stocks showed volatility, while Chinese stocks faced downward pressure due to tariffs and financial deleveraging [2]. - **December 2018**: Following a leaders' meeting, tariffs were not escalated, leading to a four-month easing period. A-shares and H-shares initially rebounded but later fell again until a central bank rate cut in January 2019 [2]. - **June 2019**: A trade agreement was reached, resulting in a one-month easing period. However, subsequent trade tensions led to declines in both U.S. and Chinese stock markets [2]. - **October 2019**: A phase one trade agreement was achieved, causing initial stock market gains, but the bond market reacted less significantly [2].