The new chairman of the Federal Reserve will take office in May. "Has the good news been fully priced in?" Nomura: The U.S. market from July to November next year "requires special vigilance."

Nomura Securities warns that as the new chairman of the Federal Reserve is set to take office in May next year, the U.S. market may face severe tests in the following months. Questions surrounding the new chairman's leadership and potential policy friction could trigger investors to sell off dollar assets, putting pressure on the U.S. stock and bond markets in the second half of next year.

According to the Wind Trading Desk, Nomura strategist Naka Matsuzawa recently pointed out in a report that although the market generally expects the new chairman to lead a rate cut in June, the subsequent policy path is fraught with uncertainty. As U.S. economic data shows clear signs of recovery, there may be strong opposition within the Federal Open Market Committee (FOMC) to further rate cuts, and this policy divergence could not only undermine market confidence in the new chairman but also trigger tensions between the Federal Reserve and the Trump administration.

This uncertainty is expected to culminate between July and November next year. Nomura analysts believe that during this period, there may be a trend of "flight from U.S. assets," leading to a decline in U.S. Treasury yields, a correction in U.S. stocks, and a weakening of the dollar. Investors should be wary of potential liquidity reversals during this time, as major global economies may halt rate cuts or even begin a rate hike cycle, thereby weakening the relative advantage of dollar assets.

High-Risk Period for the Market from July to November

Matsuzawa predicts that although the new Federal Reserve chairman is expected to be appointed in May and push for a rate cut in June, this move may encounter resistance. Against the backdrop of clear economic recovery indicators, FOMC members may strongly oppose continuing rate cuts after June.

If the Federal Reserve maintains interest rates after the June meeting, it will inevitably create friction with Trump, who is calling for further rate cuts to boost midterm election prospects. This policy deadlock, combined with signs of inflation bottoming out and the Federal Reserve ending its rate cut cycle, will become the main catalyst for the sell-off of U.S. stocks and bonds and the weakening of the dollar from July to November.

Nomura specifically points out that if market confidence in the new chairman has not yet been established, and the Trump administration may face "lame duck" risks after the midterm elections, the pace of capital outflow from U.S. assets may accelerate.

Market Turbulence Often Accompanies New Chairmen

Nomura reviews history and notes that the last four Federal Reserve chairmen experienced varying degrees of market turbulence upon taking office.

The most typical case is the "Black Monday" of 1987, which coincided with Alan Greenspan's second month in office. The report suggests that this historical pattern reflects deep-seated concerns in the market about policy continuity and the capabilities of new leadership.

Regarding this transition, Nomura specifically mentions that the market is deeply concerned that Trump may intervene in the Federal Reserve's personnel appointments to align with his reflation policies. If the new chairman is perceived as being too "dovish" in policy stance or compromising with the government, he may be forced to suppress obvious dovish positions in order to regain market trust, thereby exacerbating the risk of market volatility.

Global Capital May "Divert" from U.S. Assets

From a broader asset allocation perspective, Nomura expects a significant recovery in the global economy by 2026, with market drivers shifting from "excess liquidity" to "corporate profits." In this environment, while the absolute level of U.S. assets may not significantly decline, their relative advantage will gradually weakenThe report predicts that as other major countries stop cutting interest rates or begin to raise them, the US dollar will show a weakening trend. Especially during the sensitive window period in the second half of the year, doubts about the independence of Federal Reserve policy and a reassessment of the dominance of US assets may jointly contribute to capital outflows from the US market.

Nomura believes that compared to the market driven by excess liquidity in the first half of the year, the market logic in the second half will undergo a fundamental shift, and US stocks and bonds will no longer hold absolute dominance.