CPT Markets Focus Analysis: Market debate, the US aggressive interest rate hike is actually a mistake!
Although oil prices have not remained as high as before, the US consumer price index in August was still higher than market expectations, compared with the past values, the US increased by 0.1% month by month and 8.3% year-on-year respectively. Therefore, experts all warned that the Federal Reserve's aggressive interest rate hike strategy may continue until 2023.
After the consumer price index was released in August, the market was wailing. In order to reflect the market expectation that the FRC will continue to raise interest rates significantly, the US bond yield rate jumped across the board on the same day, including more than two-year government bond yield rate rose above 3.7%, up 13 basis points, and the 10-year government bond yield rate also rose by 9 basis points to 3.46%. As expected, the US stock was also miserable. It fell by more than a thousand points on the day, which was really ugly.
Officials are closely watching what is the main reason for pushing up inflation. It is obvious that it comes from food, transportation and rent. Among them, the inflation of rent is the most tenacious. Paying attention to inflation details, it can be found that other projects also continue to rise. The food index rose by 0.8%, and the housing price, which accounts for about one-third of the CPI weight, jumped by 0.7%, a sharp increase of 6.2% from the same period last year.
This wave of CPI reports actually bring benefits to workers. Although real wages fell 2.8% from the same period last year after inflation adjustment, they were up 0.2% from July. After the US economy hit its strongest growth rate since 1984 in 2021, its growth this year seems to be mediocre, even worse than expected, but the main reason for suppressing economic growth is inflation.
In order to curb the tenacious and high inflation, the US Federal Reserve has raised interest rates several times this year. Cathie Wood, founder of ARK Investment Management, said that she actually does not agree with this move. She said that the price of commodity is falling and freight rates are also showing a downward trend. These signs mean that supply chain problems are being eased.
At the same time, gold prices have gradually stabilized, and crude oil prices have also fallen by 35% from their highs. In addition, she expects the US economy to fall into recession, which will further reduce the pressure on inflation. Wood even said bluntly that the FRC has paid too much attention to lagging indicators such as employment data and core inflation, and instead ignores other leading indicators. The FRC's interest rate hike strategy will prove to be a major mistake in the future.
The economic outlook of the United States is becoming increasingly bleak. After the technology industry, the financial industry has also begun to streamline personnel. The reasons are nothing more than the deterioration of the overall environment and the rapid shrinking of investment banking business. What should be pointed out here are the initial public offering of stocks and the issuance of junk bonds.
Wall Street is probably brewing the first wave of layoffs since the outbreak of the epidemic, such as JPMorgan Chase , Wells Fargo , or Citigroup . They have laid off personnel in the mortgage loan department in recent months. This business has expanded significantly during the epidemic, but today is different from the past. They have to shrink after their business weakens.
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