Federal quietly handled "big things" late at night. At 2 a.m. Beijing time on Thursday, the Federal Reserve announced again: rate hikes 75 basis points (1 basis point equals 0.01%)! This is the fifth rate hike of the Federal Reserve this year and the third consecutive rate hike of 75 basis points. The cumulative rate hike of has reached 300 basis points, setting the largest intensive rate hike since 1981.
Why does the United States frequently raise interest rates? What impact does it have on our investment in funds? Don't worry, I have thought of all the questions you may be curious about, and I will interpret your doubts in one article.
. Why is the United States always hiking interest rates?
Rate hike is closely related to the continued "high inflation" problem in the United States. Inflation Simply put, the amount of money flowing in the market is higher than the demand, resulting in a price increase. Generally speaking, moderate inflation (the international community calls the inflation rate within 2-3% moderate inflation) is conducive to economic development, but if the inflation level is too high, government intervention is required. The more common method is to raise interest rates. To put it bluntly, the interest rate of is high, and everyone is more willing to deposit money into the bank and reduce loans, so as to reduce the amount of money in the market.
Affected by the epidemic in the first two years, in order to stimulate the economy, the United States issued money and cut interest rates. The amount of money in the market is large, and the inflation rate is not low. In addition, the big and two-quarters of the year started to fight, and the rise in energy prices such as oil further intensified. This has led to the continued high inflation rate in the United States since this year, so the Federal Reserve has been raising interest rates. As of August this year, the Federal Reserve has raised interest rates four times this year, but the inflation rate in August (usually looking at CPI) is still not ideal, up 8.3% year-on-year, 8.1% higher than expected. As inflation growth rates exceeded expectations, the Federal Reserve raised interest rates again to control it.
2. What impact does the US rate hike have on our investment?
1 bad U.S. stock
Rate hike will have a series of impacts on the United States:
From the economic fundamentals, company financing costs will increase (the cost of borrowing money increases, profits decrease), and consumer financing costs (decreased consumption desire) will lead to hindering corporate development and declining efficiency.
From the perspective of valuation, interest rate hikes lead to an increase in the risk-free interest rate in the market, which is equivalent to an increase in the discount rate of assets*, and this number acts as the denominator in the discount formula. The larger the denominator, the smaller the result, so the asset valuation will decline.
Finally, from the perspective of liquidity , the money in the stock market has become less and the liquidity is insufficient. Finally, under the combined effect of these factors, a negative stock market situation is formed.
How does the interest rate hike affect the stock market
After the Federal Reserve announced a 75 basis points rate hike last night, the three major U.S. stock indexes fluctuated significantly during the session, and all fell to varying degrees as of the close. However, if you don’t have US dollar assets in your hands, you don’t have to worry too much about the matter on the ocean.
Data source: iFind As of 2022/9/22
* Make a small note: The determination of the discount rate of risky assets is usually closely related to the interest rate level at that time. The interest rate here usually refers to the market risk-free interest rate, such as the yield of treasury bonds. The asset discount rate is equivalent to a "rule" for measuring assets, which can be used to calculate how much money a company makes in the future is equivalent to what it is now. The longer the ruler, the lower the value of the company's discount ; the shorter the ruler, the higher the discount value of the company. The ultimate manifestation is that asset valuation and interest rates are negatively correlated, and interest rate hikes are likely to cause stock valuation to shrink.
2 RMB has depreciation pressure
For the RMB, the US rate hikes, the US dollar is more valuable, and relatively speaking, the RMB will have depreciation pressure. For example, the RMB exchange rate broke 7 a while ago is an example. After the news of another 75 basis points hike in the United States last night, the RMB offshore exchange rate broke 7.1 again, and there is pressure to depreciate in the short term.(For the subsequent impact of the depreciation of the RMB, interested friends can refer to "Why is the RMB exchange rate falling? What will happen in the future? Will it affect me to get rich by buying a base?" ) But it is not only us who are affected. The yen has depreciated by 27% this year, the Korean won has depreciated by 29.5%, and the euro has depreciated by 15%. Looking at , the performance of the RMB is already very tenacious.
Data source: Sina Finance screenshot, 2022/9/22 Intraday data
3 on A shares : There is no decisive impact
990, the Federal Reserve has completed four rounds of interest rate hike cycles, Why not take a look at the impact of the first four rounds of interest rate hike cycles on A shares:
Data source: iFind The above data only represents a backtest of historical situations, and is not used as a view to predicting future markets, and does not constitute investment advice from Wanzhuan Financial Management. Funds are risky and investments should be cautious.
From the data above, we can see that in the four rounds of interest rate hikes, A-shares rose twice and fell twice. shows that interest rate hikes have no decisive impact on A-shares in the long run. In recent years, under the influence of a series of international events, China's economy has been relatively strong, and A-shares are increasingly able to emerge from independent markets. From the perspective of valuation, most of the broad-based indexes (such as Shanghai Composite Index and Shanghai Shenzhen 300) are currently at historical lows. may bring some adjustments in the short term, but I believe that the impact of interest rate hikes will not last for too long, so don’t be too pessimistic.
. What will happen in the future? Will there be another rate hike?
Federal Chairman Powell said at a press conference that he would continue to raise interest rates until inflation eases. The goal is to pull inflation back to 2% and remain stable. A considerable percentage of Fed officials predict the remaining rate hike by the end of the year to be 100 basis points. In general, we are still in the interest rate hike cycle. What should we pay attention to in investment in the fourth quarter?
glanced at the comment area and found that everyone had a lot of ideas. Many friends think that html can take appropriate risk aversion measures in the 14th quarter, such as increasing the holdings of for debt-biased products, , and more fixed income + funds. . For industries that are optimistic in the long term or a high-quality fund, it is also good to invest and replenish positions while the low point. Some friends also said that they would not have much impact on their investment and remain calm.
Risk warning: The above content does not constitute investment advice or commitment. Not used as any legal material. The comments on the fund's income in the article show that it does not fully reflect the fund's trend, and the fund's past performance does not indicate its future performance. Please understand the complete performance in the fund details page. The performance of other funds managed by the fund manager does not constitute a guarantee of fund performance. Investors should fully understand the difference between fund fixed investment in and zero deposit and whole withdrawal methods. When investing in fixed investment, it is an investment method that guides investors to invest in long-term investment and spreads investment costs equally. However, fixed investment cannot avoid investment risks, and does not guarantee that investment will definitely yield returns, nor is it an equivalent financial management method that replaces savings. The fixed investment returns listed in this article are calculated based on a specific fixed investment returns model. Fund sales services are provided by Teng'an Fund Sales (Shenzhen) Co., Ltd. Before investing, fund investors should confirm that they have known and understand the characteristics and related risks of the products in the article. Investors should carefully read fund legal documents such as "Fund Contract" and "Recruitment Prospectus" to ensure that they have corresponding risk tolerance. The fund manager promises to manage and use the fund assets with the principles of honesty, trustworthiness, diligence and responsibility, but does not guarantee the fund's certain profits or the minimum returns. Funds are risky, so be cautious when investing.
