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美聯儲如期加息25基點，加息週期開啟
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joined discussion · Mar 17, 2022 09:04 ·

Fed observation: The interest rate hike finally landed, with both "hawkish" and "dovish" tones, and growth stocks are poised for recovery.

In the early morning of March 15th, the interest rate that has plagued the market for more than one quarter officially landed. According to the resolution, the number of interest rate hikes exceeded the expectation of the financial community. It was originally expected that the interest rate this year would not exceed seven times, but the dot plot gave an expected value of seven times. The balance sheet shrinking came earlier, in line with expectations, and will start in May.

Powell's speech was as vague and moderate as ever. Although the dot plot gave a relatively hawkish result, causing the three major stock indexes to plunge after the resolution was released, the market has obviously improved since Powell's speech began. There are two main points: $Nasdaq Composite Index (.IXIC.US)$$Dow Jones Industrial Average (.DJI.US)$$S&P 500 Index (.SPX.US)$ Firstly, there is widespread inflation in the United States due to supply chain problems, but the supply chain for many products has begun to ease, and inflation will gradually fall month by month; in the short term, the Fed has sent a signal: it wants to resist inflation and avoid recession at the same time, and can tolerate some inflation to avoid recession. This is the result the market hopes to see.

If the high inflation problem cannot be solved this year, the Fed will control inflation in an "overtightening" way in the next two years. This is one of the few and best options for the Fed and also in line with the expectations of the financial community.Secondly, there is no concern about the recession of the U.S. economy, and there is currently no sign of it, although the economic outlook for 2022...If the high inflation problem is not resolved this year, it will be controlled through 'overtightening' in the coming years. This is one of the few practices that the Federal Reserve does behind closed doors, and it is also the best choice at present, consistent with the expectations of financial commentators.

2. Not worried about the recession of the US economy, there are currently no signs of it. Although the economic outlook for 2022 was downgraded due to the Russia-Ukraine conflict, the outlook for 2023 remains the same, giving the market confidence.
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At 2 am, the FED interest rate rose to 0.25-0.5%, the first rate hike since December 2018. Upon the news, Comex gold price increased by 0.4%, silver by 0.8%, the US dollar dropped by 0.6%, and copper rose by 2.4%.
In the early morning of March 15th, the interest rate that has plagued the market for more than one quarter officially landed. According to the resolution, the number of interest rate hikes exceeded the expectation of the financial community. It was originally expected that the interest rate this year would not exceed seven times, but the dot plot gave an expected value of seven times. The balance sheet shrinking came earlier, in line with expectations, and will start in May. Powell's speech was as vague and moderate as ever. Although the dot plot gave a relatively hawkish result, causing the three major stock indexes to plunge after the resolution was released, the market has obviously improved since Powell's speech began. There are two main points: $Nasdaq Composite Index (.IXIC.US)$$Dow Jones Industrial Average (.DJI.US)$$S&P 500 Index (.SPX.US)$ Firstly, there is widespread inflation in the United States due to supply chain problems, but the supply chain for many products has begun to ease, and inflation will gradually fall month by month; in the short term, the Fed has sent a signal: it wants to resist inflation and avoid recession at the same time, and can tolerate some inflation to avoid recession. This is the result the market hopes to see. If the high inflation problem cannot be solved this year, the Fed will control inflation in an "overtightening" way in the next two years. This is one of the few and best options for the Fed and also in line with the expectations of the financial community.Secondly, there is no concern about the recession of the U.S. economy, and there is currently no sign of it, although the economic outlook for 2022...If the high inflation problem is not resolved this year, it will be controlled in a "super-adjustment" manner in the next two years. This is a rare practice by the Federal Reserve, and it is also the current optimal choice, consistent with Wealthy Gentleman's expectations. 2. There is no worry about the decline of the US economy, and currently no signs are seen, although the economic outlook for 2022...

Dot plot: Expected year-end rates of 1.9% in 2022 and 2.8% in 2023. It is expected that there will be 7 rate hikes in 2022 (3 in December).

Economic outlook: GDP growth rate expectations from 2022 to 2024 are 2.8%, 2.2%, 2%, and 1.8% (previously expected to be 4%, 2.2%, 2%, 1.8%).

Inflation expectations: Core PCE inflation expectations from 2022 to 2024 are 4.1%, 2.6%, and 2.3% (previously expected to be 2.7%, 2.3%, 2.1%).

[After the FOMC statement] According to CME's 'Fed Watch': The probability of the Fed maintaining rates in the 0.25%-0.5% range in May is 3.4%, the probability of a 25 basis points rate hike is 43.9%, of a 50 basis points rate hike is 52.7%, and of a 75 basis points rate hike is 0%; In June, the probabilities are 0.9% for a 25 basis points rate hike, 14.3% for a 50 basis points rate hike, 45.7% for a 75 basis points rate hike, and 39.1% for a 100 basis points rate hike.

After the rate hikes, how will the market perform?Rate hikes and balance sheet reduction are not the enemies of long-term stock price trends.
In fact, the impact of rate hikes on stock price trends is not a key factor. Rate hikes and balance sheet reduction mostly affect stock valuation levels, creating significant disturbances in the market valuation levels during the heating expectation phase, especially for growth stocks. However, once the rate hikes or reduction officially start, the determining factors of stock price trends become the company's own growth prospects and profit sustainability.
Chart US GDP and S&P 500 index EPS growth rate (Source: China International Capital Corporation).
We can see that during the key 3 years of the previous monetary normalization (2016-2017-2018), the fluctuations in the US stock market were not significant. The key point is that starting from 2016, driven by the tax reform and the revival of China's real estate cycle, the US GDP growth rate improved quarter by quarter, thereby boosting the profitability of US stocks quarter by quarter from Q1 2016 until Q3 2018. After the peak of US GDP growth rate in Q3 2018, the EPS growth rate of the S&P 500 index also peaked and fell back. Only after reaching the profit peak, did the stock market truly experience a sharp decline.
Therefore, we can see that the impact of rate hikes or balance sheet reduction is on valuation levels, but the core variable determining the rise and fall of the stock market still lies in the profit level. Therefore, we cannot simply think that when interest rates are raised or the balance sheet is reduced, the US stock market will plummet. The key point is the sustainability of S&P or Nasdaq company profits under the condition of rate hikes. If profits continue to rise, the stock market will not encounter major issues in the medium to long term.
In the early morning of March 15th, the interest rate that has plagued the market for more than one quarter officially landed. According to the resolution, the number of interest rate hikes exceeded the expectation of the financial community. It was originally expected that the interest rate this year would not exceed seven times, but the dot plot gave an expected value of seven times. The balance sheet shrinking came earlier, in line with expectations, and will start in May. Powell's speech was as vague and moderate as ever. Although the dot plot gave a relatively hawkish result, causing the three major stock indexes to plunge after the resolution was released, the market has obviously improved since Powell's speech began. There are two main points: $Nasdaq Composite Index (.IXIC.US)$$Dow Jones Industrial Average (.DJI.US)$$S&P 500 Index (.SPX.US)$ Firstly, there is widespread inflation in the United States due to supply chain problems, but the supply chain for many products has begun to ease, and inflation will gradually fall month by month; in the short term, the Fed has sent a signal: it wants to resist inflation and avoid recession at the same time, and can tolerate some inflation to avoid recession. This is the result the market hopes to see. If the high inflation problem cannot be solved this year, the Fed will control inflation in an "overtightening" way in the next two years. This is one of the few and best options for the Fed and also in line with the expectations of the financial community.Secondly, there is no concern about the recession of the U.S. economy, and there is currently no sign of it, although the economic outlook for 2022...If the high inflation problem is not resolved this year, it will be controlled in a "super-adjustment" manner in the next two years. This is a rare practice by the Federal Reserve, and it is also the current optimal choice, consistent with Wealthy Gentleman's expectations. 2. There is no worry about the decline of the US economy, and currently no signs are seen, although the economic outlook for 2022...
In the early morning of March 15th, the interest rate that has plagued the market for more than one quarter officially landed. According to the resolution, the number of interest rate hikes exceeded the expectation of the financial community. It was originally expected that the interest rate this year would not exceed seven times, but the dot plot gave an expected value of seven times. The balance sheet shrinking came earlier, in line with expectations, and will start in May. Powell's speech was as vague and moderate as ever. Although the dot plot gave a relatively hawkish result, causing the three major stock indexes to plunge after the resolution was released, the market has obviously improved since Powell's speech began. There are two main points: $Nasdaq Composite Index (.IXIC.US)$$Dow Jones Industrial Average (.DJI.US)$$S&P 500 Index (.SPX.US)$ Firstly, there is widespread inflation in the United States due to supply chain problems, but the supply chain for many products has begun to ease, and inflation will gradually fall month by month; in the short term, the Fed has sent a signal: it wants to resist inflation and avoid recession at the same time, and can tolerate some inflation to avoid recession. This is the result the market hopes to see. If the high inflation problem cannot be solved this year, the Fed will control inflation in an "overtightening" way in the next two years. This is one of the few and best options for the Fed and also in line with the expectations of the financial community.Secondly, there is no concern about the recession of the U.S. economy, and there is currently no sign of it, although the economic outlook for 2022...If the high inflation problem is not resolved this year, it will be controlled in a "super-adjustment" manner in the next two years. This is a rare practice by the Federal Reserve, and it is also the current optimal choice, consistent with Wealthy Gentleman's expectations. 2. There is no worry about the decline of the US economy, and currently no signs are seen, although the economic outlook for 2022...
In the early morning of March 15th, the interest rate that has plagued the market for more than one quarter officially landed. According to the resolution, the number of interest rate hikes exceeded the expectation of the financial community. It was originally expected that the interest rate this year would not exceed seven times, but the dot plot gave an expected value of seven times. The balance sheet shrinking came earlier, in line with expectations, and will start in May. Powell's speech was as vague and moderate as ever. Although the dot plot gave a relatively hawkish result, causing the three major stock indexes to plunge after the resolution was released, the market has obviously improved since Powell's speech began. There are two main points: $Nasdaq Composite Index (.IXIC.US)$$Dow Jones Industrial Average (.DJI.US)$$S&P 500 Index (.SPX.US)$ Firstly, there is widespread inflation in the United States due to supply chain problems, but the supply chain for many products has begun to ease, and inflation will gradually fall month by month; in the short term, the Fed has sent a signal: it wants to resist inflation and avoid recession at the same time, and can tolerate some inflation to avoid recession. This is the result the market hopes to see. If the high inflation problem cannot be solved this year, the Fed will control inflation in an "overtightening" way in the next two years. This is one of the few and best options for the Fed and also in line with the expectations of the financial community.Secondly, there is no concern about the recession of the U.S. economy, and there is currently no sign of it, although the economic outlook for 2022...If the high inflation problem is not resolved this year, it will be controlled in a "super-adjustment" manner in the next two years. This is a rare practice by the Federal Reserve, and it is also the current optimal choice, consistent with Wealthy Gentleman's expectations. 2. There is no worry about the decline of the US economy, and currently no signs are seen, although the economic outlook for 2022...
At the current point in time, Nasdaq has the largest decrease among the three major US stock indexes in recent months. Currently, Nasdaq's overall PE-TTM is at 30.17 times, at the 29.69th percentile historically. However, the Dow Jones index is currently at the 70th percentile of historical valuation, and the S&P at the 43rd percentile. After continuous sharp declines, Nasdaq's valuation security has dropped to the lowest among the three indexes, therefore,after the rate hike is clear, we are even more bullish on super growth stocks that have a comparative advantage in performance.

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Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
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