Recently, the financial market's expectations for a Fed rate cut in September have reached unprecedented heights, with the probability of a cut being bet on at over 90%. However, this near-unanimous optimism may hide the risk of a collective misjudgment. It is noteworthy that institutional investors have begun to withdraw, while retail investors are still pouring in large numbers, creating a significant divide among market participants.

More importantly, the latest economic indicators do not support the argument for interest rate cuts. Let's delve into why the likelihood of a rate cut in September is low:

First, there are signs of a rebound in core inflation. Although the overall CPI data for July shows that inflation has eased, the year-on-year core inflation still stands at 3.1%, with a month-on-month increase of 0.3%. Particularly, the month-on-month increase in core inflation for the service sector is as high as 0.55%. This indicates that the trend of falling inflation has not yet stabilized, and a reckless interest rate cut may pose significant risks.

Secondly, the hidden dangers brought by tariff factors cannot be ignored. The impact of the tariffs imposed by the U.S. government on imported goods has not yet fully manifested. Investment institutions have warned that commodity inflation may rebound in the coming months. If the effects of interest rate cuts and tariffs overlap, it is likely to trigger a secondary rise in inflation.

Third, the job market remains strong. The current unemployment rate is below 4%, and hourly wage growth exceeds 4%. Several officials within the Fed have publicly expressed opposition to interest rate cuts, believing that the performance of the job market is still strong.

In this case, Fed Chairman Powell may adopt a cautious attitude, emphasizing that policy decisions will continue to rely on economic data. He may point out that the September decision will depend on the economic data from August, which will only be available in September. At the same time, he may continue to emphasize inflation risks and demonstrate the Fed's policy independence.

If the Fed maintains the current interest rates, the market may experience severe fluctuations. U.S. stocks, real estate stocks, and tech stocks may come under pressure, the dollar could strengthen, while gold and cryptocurrencies may face short-term setbacks. The risks faced by interest rate-sensitive assets may surge sharply.

It is worth noting that there is a significant divergence between institutional investors and retail investors on this issue. Retail investors continue to bet heavily on interest rate cuts, while Wall Street institutions are reducing their positions and advising clients to hedge risks. Historical experience shows that retail investors betting against institutions are often at a disadvantage.

For retail investors, it is advisable to maintain a cautious attitude at this stage. It is recommended to closely monitor subsequent inflation and employment data, and to be wary of potential fluctuations in interest rate-sensitive assets, avoiding blind following of market sentiment. When making investment decisions, one should consider all factors comprehensively, rather than relying solely on market expectations.