U.S. Treasury Secretary Yellen predicts that the Treasury's cash can be delayed at most until June 4th, which means that from June 5th onwards, the cash will be exhausted, and the default on U.S. Treasury bonds will officially begin.

Last night, the United States released the latest PCE price index, which not only rebounded but also exceeded expectations.

No wonder during this period, several Federal Reserve officials have expressed the need for future interest rate hikes.

The A-shares, which have been affected by the Federal Reserve and have been falling in waves for more than a year, according to previous data analysis, have a 2/3 probability of falling.

01, PCE exceeds expectations

The official U.S. data was released before the market opened, and after a bad set of data, U.S. stocks actually rose.

The PCE price in April rose by 4.4%, 0.1 percentage point more than the market expected. More importantly, compared with March, it also rose by 0.4%, indicating that prices are still rising.

At the same time, the core price index rose by as much as 4.7% year-on-year, an increase of 0.1 percentage point compared to last month.

A few days earlier, the United States also revised the core PCE price index for the first quarter, and the current median is 5.0%, a significant increase compared to the 4.4% in the fourth quarter, and this has been the sixth consecutive quarter that this data has exceeded expectations.

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On the other hand, the U.S. GDP growth rate was only 1.3%.Comparing two sets of data, we find that the United States' GDP growth, or economic growth rate, is continuously declining, and it is not ruled out that it will enter a state of contraction in the next two quarters. At the same time, the prices in the United States are still rising strongly, indicating that inflation remains at a 40-year high.

Economic stagnation and persistent inflation are characteristic of a typical stagflation phase.

02, Further Interest Rate Hikes are Needed

Looking at other data, the United States still needs to continue raising interest rates, at least two more times, which is equivalent to 50 basis points.

Currently, consumer spending is still growing, and residents' wages are also increasing due to inflation.

According to labor market data from the past five months this year, the number of unemployed people in the United States has reached 229,000, which is about 20,000 less than expected.

Among them, looking at the service industry data from May, the demand for employment growth in the service industry is still relatively strong. Under this strong demand, it has intensified the pressure of inflation.

Some investors analyze the U.S. market, stating that the trend of economic development in the United States is slowing down, and the inflation rate is still rising. Personal consumption expenditure has not yet approached the ideal target of 2%.

In the minutes of the May meeting, Federal Reserve policymakers expressed a lot of disagreement on whether to raise interest rates. The meeting emphasized that all actions need to be decided through data analysis. The data is coming out one after another, but all the data points to the need for further interest rate hikes.

Continuous aggressive interest rate hikes have become an unbearable burden for the economic development of the United States.However, due to the still high level of inflation, the Federal Reserve had to proceed with another round of interest rate hikes.

03, A-shares are highly likely to decline

If the Federal Reserve continues to raise interest rates, it will not only affect the United States but also have a significant impact on A-shares.

Since the end of 2021 when the Federal Reserve began to reduce its bond purchases, the Shanghai Composite Index has already started to decline.

Until March 2022 when the Federal Reserve began to raise interest rates, A-shares experienced a rapid decline.

Some time ago, it was believed that the Federal Reserve's interest rate hikes had reached their end, and A-shares had a certain rebound, but the recent trend is not good, and they have started to decline again.

Moreover, we have calculated the trend of A-shares after the United States announced the PCE data over the past two years. As long as the PCE data is higher than expected, the probability of the Shanghai Composite Index falling in the following five trading days reached 66.3%.