Short-term stability is secured, but we shouldn't be too optimistic.

The US June CPI data released last night surprisingly fell short of market expectations, indicating that inflation is declining.

The 0.4% month-on-month decline in this CPI reading was partly due to the expected drop in oil prices and partly from the unexpected decline in core inflation.

Before the release of this CPI data, the market had experienced a significant decline recently. One major reason was concern over tightening liquidity, with expectations that the Fed would raise interest rates within the year. Even yesterday, the probability of a July rate hike was priced at 50%. However, based on the latest dot plot projections, the Fed is highly likely to keep rates unchanged in July, with the earliest rate hike possibly starting in September.

Therefore, after the data came out, US Treasury yields fell sharply in response, while risk assets like gold and US stocks began to rebound significantly. The reason for gold's strong rebound is that, as a non-interest-bearing asset, the marginal cost of holding gold rises if the Fed hikes rates. Risk assets like US stocks also heavily depend on ample external liquidity.

However, there was also a speech by Fed Chair Warsh last night. We need to pay attention to Warsh's subsequent statements. Currently, we cannot be overly optimistic. Even if there is no rate hike in July, we still need to watch the next potential point, which is whether there will be a hike in September. Combined with the fact that growth stocks, represented by tech, have already seen relatively high gains, even if they can continue to rise in the second half of the year, they should enter a phase of higher volatility.

At this time, it might be appropriate to do some rebalancing and buy some value and style assets appropriately. However, strong domestic demand assets like consumption might still be in the relatively early left side of the curve.

(Not as a basis for investment)