Yesterday, I mentioned that I'll be paying close attention to the actions of the FOMC's September meeting, which is less than a day away. Regardless of the extent of the rate cut, or even if there is no rate cut at all, we need to take a longer-term view. What stage are we currently in, and how should we prepare in general? History offers a mirror, and while it may repeat itself, each cycle will produce different outcomes due to slightly different temporal and spatial contexts. We can refer to the Merrill Lynch clock cycle, which has four phases: Recovery 1. GDP gradually recovers, the economy improves, and unemployment remains high but gradually declines. 2. Loose monetary policy This phase was clearly experienced during the pandemic in 2020 and 2021. Due to the pandemic, unemployment was high and jobs were unavailable, so the government cut interest rates and implemented monetary stimulus to stimulate economic activity. - Prosperity 1. GDP continues to rise, the job market is strong, and consumer spending is increasing. 2. Monetary tightening begins, and the government raises interest rates to prevent overheating. If we have to estimate this phase, it's roughly from 2002 to the present. The pie in the pie for cryptocurrencies, AI, and the new era of intelligence is expanding. - Recession 1. GDP slows or declines, and the unemployment rate rises. 2. Interest rates are high, but they may begin to fall. This phase is actually what we may be facing now. Regardless of the FOMC's decision, the reality remains that unemployment is rising and "real interest rates" are slightly higher. This will lead to increased costs for most businesses, potentially accelerating the transition from prosperity to recession, or even moving directly from this balance sheet adjustment to the next recovery. - Depression 1. The economy is extremely poor, small and medium-sized enterprises (SMEs) are failing one after another, leading to higher unemployment and weak demand. 2. Policies are becoming more accommodative, with interest rates at very low or zero levels. This phase is ideal for sitting back and taking advantage of overvalued assets sold during the previous overheated market. Enjoy yourself and have fun, and use any unused funds to buy long-term bonds to hedge against inflation, waiting for the right opportunity to buy undervalued assets. However, history may repeat itself, but this time it might be a little different. I believe there are two possible scenarios for the next 6-12 months: Scenario 1: 1. Interest rate cuts 2. Unemployment does not continue to rise and inflation declines 3. GDP continues to grow At this point, it might be more appropriate to continue betting on risky assets and wait for the next bubble to burst before exiting. Scenario 2: 1. GDP does not grow significantly 2. The labor market deteriorates 3. Inflation continues to rise, and interest rates do not fall, or the fall is insufficient At this point, it might be appropriate to gradually sell risky assets and start buying stable assets (such as bonds) or retain cash. Both scenarios are possible; it's just a matter of probability. If you ask me which direction I'd take, I personally lean towards the second for the following reasons: 1. The authorities expect all listed companies to disclose financial reports semiannually, meaning there's a six-month window of guesswork after the release. This makes judgments even more challenging for those not deeply involved in the financial industry. While some clues could once be seen in the 10-Q report, the information asymmetry may now extend from three months to six months. 2. The rising unemployment rate shows no signs of declining, suggesting the labor market may continue to deteriorate. This could also jeopardize whether the FOMC will be forced to cut interest rates in September. Furthermore, the attached chart shows GDP growth over the past five years, showing a slowdown in GDP growth since 2021: This echoes what was mentioned earlier: Going forward, we must continue to monitor whether the job market deteriorates, GDP growth continues to slow, or inflation continues to rise, to determine which scenario the overall economy is headed towards. How does understanding this help? I believe the cryptocurrency market is essentially a leveraged market. Furthermore, cryptocurrency trading is open 24/7, with no price limits. Any fluctuations are immediately reflected in this inefficient market. Ultimately, regardless of the FOMC's decision, I hope everyone can follow their own trading path and make money. #FOMC