US May FOMC Meeting Keeps Interest Rates Unchanged, Meeting Market Expectations. US inflation is temporarily stable, and rate cuts still need to wait, but the policy of lowering bank capital requirements is a precursor to rate cuts. Nvidia’s performance continues to far exceed market expectations, leading the US stock market to new highs. AI narratives are still present, but the upcoming rate cut cycle may change market trends. Positive news continues in the cryptocurrency market, with the SEC approving Ethereum spot ETF listing standards, and the listing of related products by asset management institutions is only a matter of time. The FIT 21 bill regulates the cryptocurrency industry and may become a beacon for future industry development.
1. The Fed is still waiting for rate cut conditions, but the global rate cut cycle may have begun.
Earlier this month, the Fed announced at the FOMC that the target range for the federal funds rate remains at 5.25% to 5.50%, and will slow down QT from June. The entire meeting was mainly focused on the “inflation is still high, rate cuts still need to wait” theme, meeting market expectations. Currently, the market believes that there is a close to 50% probability of a rate cut in September, and a rate cut is inevitable by the end of the year.
As the month comes to an end, Fed Governor Christopher Waller further clarified the specific conditions for future rate cuts, providing clearer guidance to the market. Waller said that without significant weakening in the labor market, it would require three to five months of good inflation data before considering a rate cut at the end of the year.
Waller’s words make sense. The latest CPI data for April in the United States met market expectations (up 3.4%), and although the labor market is temporarily below expectations (nonfarm payrolls increased by 175,000 in April), initial jobless claims are still at historically low levels, and the labor market remains resilient. In addition, the May Markit Manufacturing PMI (flash) rose to 50.9, higher than the market’s expected 49.9 and the previous value of 50.0, and the Services PMI (flash) rose to 54.8, significantly higher than the market’s expected 51.2 and the previous value of 51.3. Therefore, the Fed does need to continue to be cautious.
However, although the Fed is still waiting, there are already signs that rate cuts are imminent. On the 19th of this month, the Fed and two other federal regulatory agencies were developing a new plan that would relax the previously proposed requirements for large banks to increase capital, with the previous plan requiring large US banks to increase capital by nearly 20%. The new plan may only be about half of the original plan. This indicates that the Fed has allowed banks to increase their lending ratios to ease profit crises, which is considered an important signal for rate cuts.
From a global perspective, the rate cut cycle has already begun. Nomura Securities pointed out in its latest report that the global rate cut cycle is already underway, with more than a dozen major central banks cutting rates. Nomura expects the European Central Bank, Swiss National Bank, Bank of Canada, and National Bank of Poland to cut rates from now until the end of June. In the context of the global rate cut cycle, rate cuts in the United States will also be a matter of time.
2. Nvidia continues to reach new highs, and the rate cut cycle may change the style of the US stock market.
Nvidia (NVDA) announced its first performance report for the 2025 fiscal year on May 22, which far exceeded market expectations: revenue increased by 262% year-on-year to $26 billion, far surpassing the market’s general expectation of $24.5 billion, reaching a new high; net profit increased by 620% year-on-year to $14.88 billion, with adjusted earnings per share of $6.12, a 19% increase compared to the previous quarter and a 461% increase year-on-year, with the market’s expectation at $5.59; data center revenue increased by 427% year-on-year to $22.6 billion, with the market’s expectation at $22.1 billion, reaching a new high; projected Q2 revenue increased to $28 billion, with the market’s expectation at $26.8 billion.
On the following day, May 23, Nvidia (NVDA) opened with a maximum increase of 11.92%, surpassing a total market value of $2.6 trillion, becoming the third largest company in the US stock market by market value, surpassing the market value of the entire German stock market. Interestingly, on the same day, apart from Nvidia, the other six companies in the “Big 7” of the US stock market (Apple, Tesla, Microsoft, Amazon, Meta, Alphabet) all fell. Therefore, some people jokingly said, “Now the US stock market is all supported by Nvidia.”
In fact, this statement is not without reason. The gains in the US stock market since last year have almost all come from the AI sector, and the gains of other stocks are rarely seen.
If we extend the timeline further, we can see that the “Big 7” in the US stock market, which is strongly related to AI, have almost supported the entire US stock market. Excluding these seven companies, the return on the US stock market is not high, while the gains of other markets excluding the US stock market are almost zero.
Therefore, it can be said that the global market’s rise in recent years has almost all come from technological innovations in the United States. This is not a good phenomenon, as the market driven by AI will inevitably experience a significant decline due to the bursting of the AI bubble. Some even say that “the day Nvidia reaches its peak is the beginning of a decline in the US stock market”.
However, with the upcoming rate cut cycle, the ample liquidity may offset the potential risks of the AI bubble. In the rate hike cycle, the market will first embrace the most certain sectors to meet the demand for hedging, which has led to the extreme trend of AI clustering. The arrival of the rate cut cycle will increase market liquidity and risk appetite, and at that time, the long-exhausted non-AI sectors may also usher in a revival, and the style of the US stock market may change.
3. Positive news continues to emerge in the cryptocurrency market, with Ethereum spot ETF “ready to go”.
“After years of waiting, cryptocurrency investors finally welcomed a new wave of market vitality in May, with Bitcoin rising back above $71,000 and Ethereum surging more than 20% on May 21, approaching $4,000.
The core reason for this violent rebound is the unexpectedly positive news from the United States regarding Ethereum ETFs. Although the market officially began to ferment around May 24, a violent rebound occurred on May 21, followed by a wave of profit-taking. However, the market did not experience a significant decline, but entered a period of volatility, indicating that the market believes this positive news is long-term.
On May 24, the SEC officially approved the 19b-4 filing for Ethereum ETFs, while the S-1 filing has not been approved yet. The 19b-4 rule is a rule established by the SEC to regulate the trading of securities listed on stock exchanges. The rule requires stock exchanges to develop and implement reasonable rules to prevent manipulation, fraud, and unfair trading practices. The S-1 form is the registration statement form required by the SEC for companies to submit when conducting initial public offerings (IPOs). In other words, the SEC has approved various details regarding the listing of Ethereum ETFs, but has not yet approved the formal listing of any institution’s spot product. Although the S-1 has not been approved yet, the rules have been established, indicating that the listing of Ethereum spot ETFs is a sure thing in the future.
With the Ethereum spot ETF on the horizon, the FIT 21 bill also received approval from the House of Representatives. The bill regulates the regulatory framework for digital assets, clearly defining what digital assets are and delineating the responsibilities of the SEC and CFTC, providing guidance for the future listing of more cryptocurrency spot ETFs and the path to compliance.
For a long time, the SEC has maintained an “ambiguous and resistant” attitude towards the cryptocurrency industry, attempting to exclude cryptocurrency assets with a “strongly ambiguous” approach. However, it has unexpectedly approved the listing of Ethereum spot ETFs, which is surprising. However, this sudden change may not be accidental, as both parties in the United States may be using cryptocurrency assets as a chip in political games.
On May 16, some Democratic and Republican senators in the United States joined forces to vote in favor of repealing the SAB 121 bill, which was established to establish accounting standards for companies that custody cryptocurrencies, meaning that banks that custody cryptocurrencies must also hold corresponding cash. Although US President Biden previously stated that he would veto the bill and allow SAB 121 to continue to exist, overturning SAB 121 may only be a matter of time. SAB 121 sends a key signal that some Democratic senators have been following Senator Elizabeth Warren’s leadership on financial and technological affairs, but now they have broken with Warren and opposed the SEC’s excessive intervention, which may mark a major shift in the Democratic Party’s cryptocurrency policy.
On the Republican side, Trump has even called for “ensuring the future of cryptocurrency in the United States” in a high-profile manner. Trump is trying to attract cryptocurrency holders in a high-profile manner in hopes of gaining their votes.
In short, May has been a month of frequent positive news, and cryptocurrency assets are being accepted by the traditional world at a faster pace than expected, adding fuel to the bull market.
Conclusion
The loose trend of global monetary policy is taking shape. Although the Fed is cautious about rate cuts, Powell’s speech and Nomura’s report suggest the possibility of rate cuts. In addition, the rate cut actions of other major central banks and the relaxation of the Fed’s capital-to-asset ratio requirements indicate a globally loose monetary policy. Pay close attention to these signals and consider opportunities in the bond market and interest rate-sensitive assets.
The strong performance of the technology sector continues. Nvidia’s earnings report exceeded market expectations, and the continued new highs of the three major US stock indices indicate the growth potential of technology stocks. Continue to focus on innovative leaders in the technology sector and evaluate their long-term growth potential.
The SEC may abandon the view that Ethereum is a security, and the emergence of the FIT 21 proposal indicates that the cryptocurrency industry is gradually moving towards compliance, bringing positive developments to the cryptocurrency market and providing new investment opportunities for investors.
