What impact do Fed candidates have on the market? What's up with the AI circle recently? What's your take on Lemo Tech?

For a long time, bonds have been the "ballast" in investment portfolios. Whether it's balancing stock market volatility or supporting classic allocations like "60/40," the core logic revolves around a low-inflation environment and the Federal Reserve's commitment to price stability—after all, when inflation rises, the real value of bond cash flows gets eroded, something everyone deeply felt in 2022 when stocks and bonds were sold off simultaneously, leading to the worst performance of traditional allocations in decades. The balance between the two has never fully recovered since.

Now, the market is eyeing a variable that could disrupt this balance: the next Federal Reserve chair. Trump has already made his preference clear, and prediction platforms show that Kevin Hassett, director of the White House National Economic Council, has at least an 80% chance of being selected. A journalist dubbed the "new Fed whisperer" even revealed that this choice is nearly finalized internally, with the key advantage being his close relationship and loyalty to Trump. Hassett's policy stance is quite clear—he has repeatedly voiced support for significant rate cuts, not only stating that he would "cut rates immediately" if appointed but also proposing a 50-basis-point rate reduction, aligning closely with Trump's desire for lower rates.

This raises a critical risk: Lawrence Gillum, chief fixed-income strategist at LPL Financial, warns that if Hassett takes the helm of the Fed, he might prioritize economic growth over price stability, potentially causing inflation expectations to "de-anchor" and weakening bonds' diversification benefits. However, the market reaction remains relatively calm so far. Since last Sunday, implied inflation expectations have only edged up slightly, and the U.S. Treasury yield curve has steepened modestly, with 1-month and 2-month Treasury bill yields dropping by 7 and 10 basis points, respectively, reflecting heightened expectations for another Fed rate cut this Wednesday and in January. This has also been the core driver behind Tuesday's stock market rally.

Gillum is currently focused on the five-year breakeven inflation rate, which hovered around 2.3% on Tuesday. He believes that as long as this indicator doesn't rapidly approach 3%, there's no need for excessive concern—but if it gradually climbs to 2.5% or 2.7% over weeks or a month, risks will emerge. Ultimately, it all depends on whether Hassett, if appointed, will "insist on cutting rates regardless of inflation." Overall, this is a low-probability but caution-worthy scenario, more like a long-term warning than an imminent reality, as the market still believes inflation will eventually return to the 2% target, and the Fed's credibility can hold in the short term.

Looking ahead to December 4, 2025, for U.S. stocks, short-term support still comes from rate-cut expectations—CME's "FedWatch" now shows an 87.6% probability of a 25-basis-point cut in December, and most major investment banks, including Bank of America and Goldman Sachs, have issued rate-cut forecasts. This clear dovish expectation will continue to support U.S. stocks. However, two potential variables warrant attention: First, whether there are new developments regarding Hassett's potential appointment—if stronger signals emerge, they could spark long-term inflation concerns and trigger swings in growth sectors like tech. Second, the Fed's tone at Wednesday's policy meeting—if officials express vigilance on inflation while cutting rates, it might ease market worries about excessive easing; conversely, a more dovish stance could further boost cyclical and growth stocks.

From a fund-flow and sector-logic perspective, financials and tech, which have recently benefited from rate-cut expectations, still have short-term momentum, while consumer sectors may gain support from a mild uptick in inflation expectations. But beware of a pullback after "expectations are met," especially if the meeting outcome aligns with market forecasts, as some investors may take profits. Overall, U.S. stocks on December 4 will likely maintain a strong but volatile trend, with fluctuations possibly wider than the previous day. It's advisable to closely monitor wording changes in the Fed's policy statement and real-time movements in the five-year breakeven inflation rate, as these two indicators will directly influence short-term market sentiment and sector rotation.

To chat a bit more, as I mentioned before, I've also been researching Hong Kong IPO subscriptions. Recently, I got allocated shares in Lemo—the grey market and first-day trading were truly a rollercoaster. Luckily, I sold around 72 to lock in profits. Of course, a friend asked me if this stock would be included in Stock Connect. I really don’t know, but I’ve heard the company is considering it. For such small-cap stocks, inclusion would likely require the share price to reach around 200, so don’t expect it this year—it’ll have to wait until next year at least.

Also, the AI space has been quite interesting lately. No need to dwell on Google and OpenAI. First, AMD teamed up with Hewlett Packard Enterprise and Broadcom! A tripartite alliance to build a rack-scale AI computing platform, declaring war on "NVIDIA's Blackwell series." Then, Amazon released Trainium 3, showcasing significant technical breakthroughs.

But the market chose to "watch coldly." Why? Mainly because the market sees this as a move to boost cloud-computing competitiveness rather than the emergence of a true AI trend. But if AWS maintains 20%+ growth, the market will reprice AMZN.$Tesla(TSLA.US) $Alphabet(GOOGL.US) $GraniteShares 2x Long NVDA Daily ETF(NVDL.US) $GraniteShares 2x Long META Daily ETF(FBL.US) $LEMO SERVICES(02539.HK) $Robinhood(HOOD.US) $Amazon(AMZN.US) $NVIDIA(NVDA.US) $AMD(AMD.US) $Direxion 20+Yr Trsry Bull 3X(TMF.US)