Feder interest rate hike Although the federal funds rate is added, it will eventually lead to an increase in deposit and loan interest on Bank of America , because the deposit and loan interest on bank of America is adjusted based on the federal funds rate, which will have an impact on the investment market.
Is the Fed's interest rate hike good or bad for the stock market?
bad for the stock market, because after the Fed's interest rate hike, many funds will flow into banks from the market. Because deposit interest rates rise, the funds entering the stock market will decrease, and even funds will flow out of the stock market. The rise and fall of stocks mainly depends on the comparison of inflow and outflow funds. The outflow funds are far greater than inflow funds, which will cause a sharp drop in the stock market.
The reason why the Fed's interest rate hike caused negative news in the domestic stock market:
[1] The Fed's interest rate hike will cause domestic capital to flow back to the United States, which is a severe blow to the investment market.
【2】In order to resolve the pressure of domestic capital outflow, the central bank may respond by cutting interest rates or adjusting the exchange rate , and the RMB will face depreciation pressure.
【3】Once the RMB depreciation expectation is formed, it will impact domestic asset prices, leading to weakening of sectors such as finance and real estate. The outflow of hot money will also be detrimental to the strengthening of A shares .
Overall, the Federal Reserve's interest rate hike will cause some of the global funds to flow back to the United States, which will lead to a reduction in liquidity in the capital markets of other countries and cause negative news to the stock market. But this negative is temporary, after all, this is news, not fundamentals.
