A rate cut does not signify the end; instead, it could be the starting point of new risks.

This policy adjustment seems more like a result forced by the market, rather than a proactive choice by policymakers. The timeline is crucial: the rate cut was announced at 3 a.m. on Thursday, and half an hour later, Powell appeared to speak. I predict he will send an unexpectedly hawkish signal—prepping the market in advance, hinting that further rate cuts won't come easily.

History tells us: when it's time to cool down the market, the Fed never hesitates.

Why the hawkish shift in expectations? The logic is simple.
After the rate cut, rates will fall to around 3.5%, the so-called "neutral range," which no longer counts as a tightening policy. But the problem is that inflation is still at 3%, quite a distance from the 2% target.

Looking at economic data, it hasn’t deteriorated to the point that continuous easing is necessary. Technically speaking, the Fed lacks sufficient reason to continue loosening. This is consistent with their previous stance—delay as much as possible, remain as tough as possible.

My view is clear:
After next week’s rate cut, the market will likely see a deep correction, and it won’t be brief.

In terms of my own strategy, I’ll be setting up 2x to 5x long-term short positions during the rebound.

Of course, if you prefer a more conservative approach, the safest way is to stay on the sidelines—wait until the real crash comes next year before considering bottom-fishing.

Why wait until next year?
Because the policy environment in the second half of next year could change completely: after a new administration takes office, it’s highly likely they’ll appoint a new Fed chair, and the new pick may well pursue aggressive easing. At that point, the liquidity floodgates will truly open, kicking off a 3- to 5-year bull cycle.

Right now, it’s the calm before the storm; next year will be the real turning point.