Last week, with FOMC alleviating concerns about rate hikes in June and nonfarm payroll falling below expectations, US stocks rebounded, with the three major indices rising by 0.6% to 1.4%; US bond yields initially rose and then fell, with the 10-year yield dropping by 16.2 basis points to 4.501% for the week, with short-end falling more than long-end. In short, both stocks and bonds reflected the market’s optimism about renewed rate cut vibe.
May FOMC successfully alleviated concerns about reflation and rate hikes, reigniting market optimism for rate cuts. The implied probability of rate cuts in 2024 jumped from a low of 31% (4/30) to 62%, and the number of rate cuts revised to 1-2 cuts this year.
RISE View: Boosted by liquidity, bull market to continue
After all talking, real money is the driving force behind the market. Looking ahead to the US stock market, cash accumulated in the Treasury General Account(GTA) will flow out after the tax season, with GTA expected to gradually decrease from the current US$930bn to US$500-600bn over the next three months, releasing US$3-400bn in liquidity; additionally, slowing down QT means the Fed withdraws less funds from the market (reducing the monthly redemption limit by US$35bn) and the pace of reverse repo decreases, both factors supporting liquidity positivity. In short, the bull market will continue.
