BlackRock released a statement saying that as expected by the market, the Federal Reserve announced a significant 50 basis point interest rate cut in its September rate decision, describing this rate cut as a "reset" of its monetary policy. The decision to cut rates was based on the Federal Reserve's assessment of the current economic situation in the United States, stating that the "economic conditions remain robust" and the risks facing economic growth and inflation expectations are now "balanced". The monetary policy adopted is in sync with the development of the economic situation. BlackRock mentioned that the Federal Reserve chose to cut rates by 50 basis points instead of 25 basis points, and the reason for this decision may be found in Federal Reserve Chairman Powell's remarks: "The U.S. economy is growing at a steady pace... We want to maintain this momentum." However, this also indicates that the Federal Reserve is more concerned about the risk of the U.S. economic growth slowing down excessively compared to balancing risks. At the same time, the Federal Reserve did not explicitly acknowledge the risk of inflation rising. It is worth noting that the Federal Reserve did not mention the positive impact of loose policy on U.S. economic growth, which is unusual in the context where restrictive policies should be taken, further confirming the atypical nature of the current economic cycle. The impact and implications of the Federal Reserve's rate cut on the market This rate decision is reminiscent of December 2023 when the Federal Reserve had already reinforced the market's expectations for a rate cut. Although this move was unexpected and may have a short-term positive impact on the market, BlackRock's think tank believes that the possibility of further market volatility in the future will increase, especially if U.S. economic growth and inflation fail to achieve a "soft landing" as per the Federal Reserve's latest forecast. Given the significant uncertainty in the current global economic outlook and the existing disagreements within the Federal Reserve before entering the "quiet period," the almost unanimous decision on the policy direction now may be more surprising than any dissent. Jean Boivin, head of BlackRock's think tank, said that Federal Reserve Chairman Powell referred to this rate cut as a "reset" of monetary policy, but this term should have been used when the Federal Reserve decided to pause rate cuts. Therefore, it is clear that this is not the beginning of a broad easing cycle. We believe that market expectations for the size of the rate cut may ultimately be disappointed, and the resilience of U.S. economic growth will be a positive development." In addition, through the Federal Reserve's Summary of Economic Projections (SEP) dot plot and the comments of the Federal Reserve Chairman at the press conference, we have further clarity on the future direction of U.S. monetary policy. The dot plot indicates that the median expected rate for 2024 implies that there could be two more rate cuts, each by 25 basis points, in the remaining two FOMC meetings this year, while the 2025 median expected rate indicates that policy rates may be cut by a further 100 basis points next year. Rick Rieder, Chief Investment Officer of Fixed Income at BlackRock, said that this rate cut decision could trigger a series of reactions in the financial system. The key significance is that the Federal Reserve may continue to cut rates over the next two years. As rates decline, fixed income assets are expected to benefit, but this does not mean that the performance of fixed income assets will follow a linear upward trend. Because the market is also influenced by other factors such as the development of the U.S. economy, the results of the U.S. elections, geopolitical situations, etc. However, BlackRock still sees opportunities in assets in the middle of the yield curve, especially those with yields higher than U.S. Treasury bonds. Because the U.S. real benchmark rates are still high, even if the Federal Reserve tries to further lower rates in the next year, these assets may still provide significant returns. Globally, perhaps no region is more eagerly awaiting the policy decision of the Federal Reserve than Asia. For many years, central banks in various countries and regions in Asia have been constrained in loosening monetary policy due to the weak yen and high interest rate policies in the United States. Now, with the reversal of the yen trend and adjustments in Federal Reserve policy, this situation is finally changing. Central banks in Asian countries are gradually regaining independence in their monetary policies. For example, the Bank of Indonesia unexpectedly announced a rate cut on September 18, while the Central Bank of the Philippines took a rate cut action last month. The 10-year government bond yields in both countries are higher than U.S. Treasury bonds by hundreds of basis points, forcing them to raise rates significantly in recent years to curb currency depreciation. One of the primary reasons cited by the Bank of Indonesia in its statement was the expectation of looser U.S. monetary policy. Navin Saigal, Head of Macro Markets for Fixed Income Investments in Asia at BlackRock, said that for a long time, under the influence of external pressures, various regions and countries in Asia have faced high interest rates and low inflation, but these influences are now diminishing. Therefore, now may be an ideal time for global investors to continue to include Asian fixed income assets in their portfolios. Shenyu Fei, Chief Equity Investment Officer at BlackRock Fund, Manager of BlackRock China New Horizons Mixed Fund, Manager of BlackRock Industry Preferred Mixed Fund, said that at the current point in time, the rate cut by the Federal Reserve is expected to reduce pressure on exchange rates in various countries, opening up space for easing monetary policy, and global liquidity easing will provide strong support for valuations. The decline in interest rates will lead to lower marginal costs of funds, increasing the attractiveness of stable high dividend assets, with Hong Kong high dividend assets being more directly affected and potentially benefiting some interest rate-sensitive sectors. Of course, the most discussed topic in the market is the release of Chinese monetary policy space brought about by the U.S. rate cut. If there is follow-up to loose monetary policy domestically, it may boost the performance of the stock market. However, overall, we believe that the effects mentioned above are marginal, and the impact of the U.S. rate cut on the domestic stock market is more about the slope rather than the direction. The performance of stocks essentially reflects the profitability of companies, which is more related to the domestic economic fundamentals and long-term industry policy trends. Therefore, in our investment approach, we will closely follow the macroeconomic situation while conducting solid research, searching for industry and individual stock opportunities with alpha logic from the bottom up, and closely monitoring the potential for distress reversal in some bottom asset classes. Liu Xin, Chief Fixed Income Investment Officer at BlackRock Fund, Manager of BlackRock Xinyue Fengli Bond Fund, Manager of BlackRock Pu Yue Fengli One-year Holding Mixed Fund, Manager of BlackRock China 0-3 Year Government Finance Bond Index Fund, is that, the Federal Reserve's first rate cut exceeded expectations, the short-term yields of U.S. bonds quickly declined thereafter, and the yield curve of U.S. government bonds steepened. But from the dot plot, it is clearLook, the expectation of only 2 interest rate cuts within the year is lower than the previous market pricing, leading to a slight rebound in US bond yields.He believes that, overall, in the context of the 50 basis points rate cut by the Federal Reserve, the domestic bond market and policy direction are still "dominated by us". We judge that the fundamentals are expected to long-term benefit the domestic bond market. The Fed's rate cut in the second half of the year will alleviate exchange rate pressures, further opening up monetary policy space. Credit bonds are expected to remain in a fluctuating trend in the short term due to valuation and slowing demand at the end of the year, but we are optimistic about the long-term direction of overall lower long-term financing costs. Wang Xiaojing, head of multi-asset and quantitative investment at BlackRock Fund, said that after the Fed's rate cut, there should be a larger rate cut space by the central bank, which is positive for the bond market. The midpoint of the RMB exchange rate is already close to the current price, indicating that the central bank has some operating space to prevent exchange rate risks, and there is no need to worry about short-term exchange rate volatility caused by rate cuts. The risk lies in the long-term interest rates falling too fast or the yield curve inverting. He stated that if rate cuts and reserve requirement cuts are implemented, although slightly later than market expectations, it will help repair sentiment and confidence in the stock market. Continued narrowing of interest rate differentials is unfavorable for the financial industry, but it benefits other industries. If a scale and rapid-acting fiscal policy is also introduced simultaneously, it will stimulate demand and impact the overall market. The risk lies in monetary and fiscal policies not being timely or reaching the intended scale. Measuring the long-term risk premium of the CSI 300, the overall valuation of large-cap stocks is currently the third cheapest point in nearly twenty years, only behind the stock market crisis in 2015 and October 2022. However, some industries and style factors have already been fully or excessively priced in the long-term value in the low interest rate low-growth environment, so caution is needed in the short term. He mentioned that attention should be paid to the potential for RMB appreciation - the monthly total foreign exchange purchases and sales by national commercial banks turned positive in August, after being negative for the first seven months. If the inflow of foreign exchange continues to flow positively, it will partially push up the RMB exchange rate.