"Wash trade" shakes the world, and Xing Zi Qiang's latest judgment

On February 2nd, Morgan Stanley's Chief Economist in China, Xing Ziqiang, discussed recent capital market "rollercoaster" volatility, driving factors, and subsequent investment directions in the Macro Strategy Talk at Morgan Stanley. He pointed out that the recent capital market has experienced "rollercoaster" volatility, mainly influenced by multiple factors: including the nomination of Kevin Warsh as the new chairman of the Federal Reserve, advocating a policy direction of "no change in interest rates, speeding up balance sheet reduction", volatility in Japanese government bonds and rumors of currency market interventions, and underperformance of some AI companies in the United States. These changes have sparked market concerns about tightening liquidity at the margin, especially reflected in the "epic-level turbulence" in the precious metals market. Xing Ziqiang analyzed that if Kevin Warsh takes office, it is expected that he will continue the interest rate cut path, but will accelerate the reduction of the balance sheet, reduce the use of unconventional liquidity tools, and return to traditional interest rate regulation. This move may lift the market's volatility center, making volatility more normalized. The forward guidance he provides may also not be as clear-cut as in the past 10 years. This series of changes will trigger a re-balancing of expectations for Federal Reserve policy. However, the overall direction of the United States--driving growth through relatively high investment, relatively persistent inflation, and debt reduction through low interest rates--has not changed significantly. This is not a debt reduction direction that can be completely solved by a Fed chairman or monetary policy. Therefore, in this process, in the long run, the gradual weakening of the fiat currency system represented by the US dollar against other strategic assets and the erosion of credit have not changed.