The U.S. market is back to the early year mode, "high interest rates" are back?

Recent Strong Performance of US Economic Data, Expectations of Rapid Fed Rate Cuts Cooling, Forcing US Stocks to Pull Back, 10-Year US Treasury Yield Returning to the 4% Mark, Is "High Interest Rates" Back? Earlier this week, the 10-year US Treasury yield rose back above 4%, reaching its highest level since early August. Bets on Fed rate cuts are decreasing, with the swap market expecting at most 2 more 25 basis point rate cuts by the end of the year, compared to the previous expectation of 2 cuts two weeks ago. Veteran of Wall Street, Ed Yardeni, founder of Yardeni Research, said: "After Friday's strong jobs report, the market consensus may shift to not needing to rush to further ease." High Uncertainty in US Economic Outlook US employment data is strong, the service sector is performing well, and the stock market is hovering near historic highs on both sides of the Atlantic. However, risks such as the US election and geopolitical tensions still exist, leading to high uncertainty in the changing economic outlook. Therefore, a major issue facing the US stock market is how to deal with the changing prospects. Morgan Stanley strategist Mislav Matejka stated: "When US stocks decouple from the Fed, the market assumes the economy will accelerate, but the situation is actually the opposite - the key driver of the stock market will still be growth prospects. Although the market widely accepts the expectation of a soft landing, it may take longer to confirm." Msika and Barnert noted that upcoming data will be crucial for market sentiment, especially this Thursday's CPI inflation data. US Bank strategist Ohsung Kwon and others pointed out: "With improving macro data, stocks should be able to withstand a slight unexpected uptick in inflation, but if there is a larger surprise, it could bring uncertainty to the easing cycle and increase market volatility." According to Bloomberg data, the options market has raised the implied volatility of the S&P 500 index to around 1.1%, slightly higher than last week's 0.9%. How to Deal with Changing Prospects? Msika and Barnert stated that investors need to increase exposure to improving economic data, especially as US economic data is stronger than Europe's at the moment. In addition, investors are also starting to worry about the impact of high interest rates. As interest rates rise and risks abound, the volatility index is also increasing. The emergence of numerous risk events has collectively forced the market to hedge over the past week. At the same time, market pricing has made the situation more complex, to some extent making the US stock market more fragile. Charlie McElligott of Nomura Securities stated that the reduction of long-term leverage risk by systematic investors in the interest rate market is "absolutely huge"