A historic interest rate hike was staged last night. The Federal Open Market Committee (FOMC) decided to raise the benchmark interest rate by 75 basis points to a range of 1.50%-1.75%.
This is the largest single interest rate hike by the Fed since it raised interest rates by 75 basis points in November 1994. Some media even called it "the boldest decision since 1994."
After the resolution was announced, US stocks The three major stock indexes all dived , and the Dow once hit a low of 30185.08.
Subsequently, Fed Chairman Powell made a dovish statement at the press conference: It is expected that a 75 basis point interest rate hike will not become the norm, and the next meeting may raise interest rates by 50 basis points or 75 basis points. The stock market rebounded in response. As of the close, the Dow Jones Index rose 1.00%, the Nasdaq Composite Index rose 2.50%, and the S&P 500 Index rose 1.46%, ending the five consecutive negative days; large technology stocks and The concept stock generally rose, and gold also rose.
The interest rate hike by the Federal Reserve has also attracted great attention from A-share investors. On June 16, the three major indexes of the A-share market diverged throughout the day. The Shanghai Composite Index fell 0.61%, the Shenzhen Component Index rose 0.11%, and the GEM Index rose 0.4%. Northbound funds bought 4.452 billion yuan in net throughout the day, which was only yesterday’s net purchase. Thirty percent of the purchase price.
What is the reason behind the Federal Reserve raising interest rates ? What impact will it have on the A-share market? Fund managers contact Southern Asset Management immediately,
Morgan Stanley Huaxin Fund , Great Wall Fund , China Merchants Fund, Chuangjin Hexin Fund, Harvest Fund , Bosera Fund , Qianhai Open Source Fund , West Top ten fund companies such as Lide Fund .
In the view of these fund companies, the Fed's interest rate hike is expected, and the market will react dovishly in the short term, but the medium-term impact cannot be ignored; the interest rate hike will have little impact on the Chinese market trend, and A-shares are still expected to emerge from an independent market.
This epic rate hike is "expected"
The Fed's interest rate hike is expected. The process of raising interest rates is inseparable from the previous economic environment in the United States and the international environment this year.
Zou Deli, general manager and fund manager of the Fixed Income Investment Department of Great Wall Fund, believes that "the Fed's interest rate hike last night is generally in line with the latest market expectations. After the March interest rate hike was implemented, the market's expectations for this interest rate hike were originally around 50bp. , but then U.S. inflation hit new highs, so the market’s expectations for the Federal Reserve to raise interest rates more vigorously became stronger. "
Morgan Stanley Huaxin agreed with this view and believed that the subsequent guidance was dovish. Pai, "The U.S. May CPI growth rate announced last Friday was 8.6% year-on-year, an increase of 0.3 percentage points from the previous month. After breaking the expectation that inflation will peak and fall, the market has begun to price a higher interest rate hike. June 13 , The Wall Street Journal reported that at this week’s Federal Reserve interest rate meeting, the Federal Reserve may consider the possibility of raising interest rates by 75 basis points; and the CME Fedwatch tool also shows that as of June 14, there is a possibility of a 75 basis points increase in interest rates at the June interest rate meeting. The probability has increased to 96.5%, and the probability of further raising interest rates by 75BP in July is also close to 90%. The results of the interest rate hike at this interest rate meeting are in line with expectations, and Powell's guidance for the next interest rate hike is relatively dovish. The market is optimistic about a July interest rate hike. The expectation of 75BP has also been reduced. "
The reasons behind the interest rate hike can be summarized into three points: First, the Fed's quantitative easing in previous years has led to excess domestic liquidity in the United States. The second is that the Russia-Ukraine war has dragged on, and the prices of oil and natural gas have remained at high levels. With the increase in European demand, financial sanctions have backfired, and natural gas prices have repeatedly hit new highs. The price impact has finally been transmitted back to the United States. The third is the trade war between China and the United States in the past few years. The United States has increased tariffs on goods exported from China. The final pressure has also flowed back to domestic consumers and companies in the United States.
This interest rate hike demonstrates the Federal Reserve’s determination to control inflation. investment fund believes that “Judging from the extent of this interest rate hike, the Federal Reserve is still determined to alleviate inflationary pressure by sacrificing demand to bridge the gap between supply and demand. Compared with the previous ‘soft landing’ strategy, it has strengthened its determination to control inflation."
After Powell's dovish speech, the market's expectations for subsequent interest rate hikes have been lowered. "The overall policy stance is more dovish than market expectations, mainly to appease the market. Looking forward to the second half of the year, the U.S. economy will gradually peak, and prices may remain high and fluctuate, but it will be difficult to reproduce the previous surge. Coupled with weakening demand, inflation is likely to be stable and then fall. Therefore, the probability of the Fed maintaining interest rate hikes of more than 50bp each time in the second half of the year is relatively high. Low. "China Merchants Fund said.
The U.S. market is not optimistic, or it may affect the global market.
What consequences will the Fed's interest rate hike bring to the U.S. market? Fund managers interpreted it from the long, medium and short-term perspectives.
Chief Macro Analysis of Chuangjin Hexin Fund Shi Luo Mercury believes that this interest rate hike will affect the public's trust in the Federal Reserve and affect the effectiveness of controlling inflation. "Because the U.S. CPI data released a few days ago exceeded expectations and reached a new high, the market has been cautious about raising interest rates in recent days. 75bp already has certain expectations, and the Fed’s operations have adapted to market expectations. Since the Fed has been guiding interest rate hikes by 50bp before, coupled with the lag in the timing of previous interest rate hikes, it fully reflects the continued misjudgment of the US inflation situation by this Fed's decision-makers and the lack of forward-looking macro situation judgment and policy decisions. Ability to make decisions based solely on real-time data, which will impact the public's trust in the Federal Reserve and affect the effectiveness of inflation expectation control. "
Western Gains Fund also believes that the Fed's previous decision was a misjudgment. "Due to the market's overly nervous hawkish expectations before the interest rate meeting, and the Fed's first announcement of the possibility of future interest rate cuts, the market responded dovishly in the short term. The 10Y U.S. Treasury yield fell to about 3.3% from 3.5% at the beginning of the week, and the three major U.S. stock indexes rebounded. However, since last year, the Federal Reserve has repeatedly revised its interest rate hike path upwards after repeatedly misjudging inflation. Therefore, while the short-term interest rate hike path seems to be relatively clear, its judgment on long-term interest rate cuts is not so reliable. "
Regarding the U.S. bond market, Li Jincan, manager of the Harvest Ultra-Short Bond Fund , believes that the risk of continuous interest rate hikes has not been eliminated. "The long-term end of U.S. bonds takes into account recession expectations, while the short-term end refers to the guidance given by the interest rate hike path. In the near term, The likelihood of an inversion has increased. However, in the short term, the risk of subsequent high inflation and continued interest rate hikes by the Federal Reserve has not been eliminated. "
Western Gains Fund holds a similar view, "Under the constraints of energy and labor supply, the pace of inflation still has more uncertainties, but faster interest rate increases will make the expected recession of the U.S. economy come sooner. . The U.S. Treasury yield curve is likely to invert significantly again in the second half of the year. The market reacted dovishly in the short term, but the medium-term impact cannot be ignored. "
Qianhai Kaiyuan Yang Delong expressed concern about the subsequent trend of U.S. stocks. "Overall, the Fed's interest rate hikes have had a negative impact on the growth of the U.S. economy and the capital market, and may cause U.S. capital market turmoil. U.S. retail sales data in May fell for the first time since May. The reason is that rising prices have hit consumer confidence and reduced consumers' purchasing power. More and more economists say that the U.S. economic contraction will be unavoidable next year, which will also have a negative impact on the trend of U.S. stocks. Therefore, the risk of U.S. stocks peaking and falling this year is increasing. "
In addition, the Fed's interest rate hikes may trigger fluctuations in global markets." Looking back at the Fed's history of tightening money to fight inflation in the late 1970s, we can see that Volcker took office in August 1979, and firmly fought against inflation from 1979 to 1982. During the period of inflation, the U.S. stock market fluctuated as a whole. The stock market did not rebound sharply immediately after inflation peaked. It was not until August 1982 that the U.S. stock market entered a bull market after inflation had fallen sharply. At this time, the benchmark interest rate had already entered a downward channel. The current U.S. bond yield is 3.3%, and the actual yield is 0.63%. The overall situation is still easy to move up and difficult to move down. Compared with the similar position of U.S. bond interest rates in the past, the current U.S. stocks are slightly undervalued. The valuations of CSI 300, and Hong Kong stocks are reasonable, GEM is overvalued, and we still need to be wary of market fluctuations caused by the global liquidity crunch. "Feng Fengdi, a postdoctoral researcher at the Macro Strategy Department of Boshi Fund, concluded.
A-shares are expected to emerge from an independent market
A few days ago, Fund Manager gathered different fund companies twice to comment on the independent market that A-shares have ignored the external slump. So after the Federal Reserve raises interest rates this time, can the independent market of A-shares continue?
Southern Fund said that since the beginning of this year, factors such as the Russia-Ukraine conflict, the Federal Reserve's interest rate hikes, and the rebound of the domestic epidemic have superimposed on each other. Both Chinese and American stock markets have experienced corrections, resulting in a certain "asset price linkage" phenomenon. However, after the impact of the epidemic eased at the end of April, the domestic equity market and the U.S. stock market diverged. A-shares and H-shares have been significantly stronger than U.S. stocks in the past month: the reason behind this is that the fundamentals of A-shares and H-shares are closely related to the Chinese economy, and China and the United States are in different economic cycles . With monetary policies and interest rate trends diverging, the stock market will behave differently accordingly.
"The core contradiction in the United States is inflation, while the core contradiction in the country is economic recovery after the epidemic." Southern Fund believes that external market changes will have less impact on the domestic stock market, especially since the market has fully anticipated the monetary tightening. In the coming period, The trend of the domestic stock market over time depends more on the domestic economic fundamentals. Looking forward to the future,
Southern Fund believes that the country will still maintain a moderately loose monetary policy and the fiscal policy will continue to be strong. Against the background of weak economic fundamentals, the country will have a higher tolerance for inflation and a higher price level. The management of the economy will carry out more structural adjustments to stabilize prices and ensure supply to protect people's livelihood, rather than adopting overly radical aggregate policies. With domestic economic expectations improving, although the Fed's balance sheet reduction may still cause market disruption, it will not change the mid-term positive trend of A-shares.
Great Wall Fund believes that A-shares are expected to continue to emerge from the independent market: "The United States is currently in the stage of entering the "stagflation" dilemma. Due to high inflation and repeated strong interest rate hikes, the expectation of a U.S. economic recession will become stronger. This is reflected in the market. The adjustment range of U.S. stocks this year has been higher than that of A-shares, and there is still the possibility of continued adjustments in U.S. stocks in the future. However, for A-shares, 3,000 points should most likely reflect the policy bottom and the market bottom. We still hope to get out of some independent market conditions. "
Qianhai Kaiyuan Yang Delong believes that the independent market trend of A-shares some time ago came from policy support and market recovery, and the current strong market trend has taken shape. "Now there has been a fundamental change in the market trend, so I have previously suggested that everyone change their bear market thinking. The recent market performance has once again proved that the market trend has begun to gradually pick up. Each round of decline has become a high-quality stock or high-quality capital allocation The timing of the fund, and even the adjustment during the session, all indicate that the current strong trend in the market has taken shape. "
Morgan Stanley Huaxin Fund also believes that the growth stock market is expected to continue. "The overall benefit rate of equity assets has declined, and U.S. stocks have rebounded across the board, with the Nasdaq leading the gainer and reflecting the growth style of A-shares. The Science and Technology Innovation 50 Index and the GEM Index have outperformed the broader market.
In terms of outlook, interest rates will rise in the United States It is expected that will be revised downwards and the upward pressure on interest rates will ease during the window period, and the growth stock market is expected to continue. "
Regarding the Hong Kong stock market, China Merchants Fund believes that it is expected to stabilize and rise in the future. "For the Hong Kong stock market, the market has already reflected the expectation of a 75bp interest rate hike, and dovish remarks will boost the market's risk appetite in the short term. As the domestic economy recovers in the second half of the year, liquidity and fundamentals will resonate, and we expect The Hong Kong stock market will stabilize and rise."
A Shanghai fund manager also said that the impact of the Fed's interest rate hike on domestic assets is relatively controllable. "Looking forward, the Fed's short-term tightening slope will still be steep, and the impact on overseas markets will continue to exist. However, considering the obvious misalignment of domestic and foreign economic and monetary policy rhythms, domestic monetary policy will still be generally focused on me, and liquidity will remain reasonably abundant. However, the space for interest rate cuts is limited. "
However, the risks in the second half of the year are also worthy of vigilance."Looking ahead to the entire second half of the year, a stagflation-like pattern of high overseas inflation, rapid liquidity contraction, and slowing economic momentum may increase the vulnerability of the global financial system and economic momentum. The slowdown in external demand and the potential spread of global financial system risks may disrupt China’s policies to stabilize growth require vigilance against market volatility risks and unexpected declines in external demand in the second half of the year,” Luo Shuixing from Chuangjin Hexin Fund reminded.
This article comes from China Fund News
