Editor's note: Feder 3 rate hike in seems to be a sure thing, so what is the difference between this rate hike and the past? What investment opportunities are there? Details
Author: Fyuan
On March 2 local time, Federal Reserve Chairman Powell At the hearing of the House Financial Services Committee, he said that although believes that the impact of the situation in Ukraine on the US economy is highly uncertain, it supports a 25 basis point interest rate hike at the March interest rate meeting. In addition, Powell still believes that inflation will cool down within the year. If inflation remains hot, it is not ruled out that a 50 basis point rate hike will be raised at one or multiple meetings. Powell's speech dispelled the speculation of aggressive interest rate hikes in the market, gave the market a "peace of mind", and the three major stock indexes of also rose accordingly.
Source: Huasheng Securities
1. Historical review of the Federal Reserve's interest rate hike
In the past forty years, the Federal Reserve has had 6 rate hike cycles , with an average rate hike of 281, and an average duration of 22 months. These interest rate hike cycles are rich in types, including high inflation caused by supply-side pressure, bubble pressure brought by real estate and stocks, and the normalization process after the implementation of unconventional policies.
Source: Wind
History is always amazingly similar, but not a simple repetition. What are the differences between this rate hike?
- The epidemic factors are a unique background in the current macro environment. The supply and demand constraints caused by are essentially different from other crises and recession stages in the past 50 years, especially the current inflation has reached a new high in the past 40 years, and its causes are closely related to the impact of the epidemic;
- Feder Monetary policy
- Feder Monetary policy The l3 framework is constantly improving and mature, and has made important progress in monetary policy operation continuity and expectation management of . is very different from the stages of frequent and repeated interest rate hikes/rate cuts in the 1970s and 1980s. ;
- The world today is facing major changes unseen in a century, and the conflict between Russia and Ukraine is constantly escalating, and the uncertainty faced by the Federal Reserve has increased significantly under the shadow of war.
However, CICC said that the supply shock, soaring prices, overheating demand, and normalization of policies all seem to be present in this round of interest rate hike cycle. may be most similar to 2004 in the early stage, and the short-term interest rate hike will not be slow, but the pace of the second half of the year is still uncertain.
2. How much impact does the Fed rate hike affect US stock ?
learns from history. The implementation of interest rate hikes often causes a relatively obvious adjustment in the US stock market, but from the perspective of the entire interest rate hike cycle, the main indexes end the interest rate hike cycle with a close increase. The report released by Guoyuan Securities recently clarifies three main characteristics of the last four interest rate hikes:
1. The implementation of interest rate hikes often causes more obvious adjustments to the US stock market, and is particularly obvious in the past two times. The entire down-regulation process of lasted about a month, and then it began to be repaired gradually. overall showed an "adjustment-repair" trend. 's last two first round of "callback-repair" cycles are about 6 months ;
Market source: Huasheng Securities
2. It should be noted that the adjustment after the interest rate hike may not be in place in one step. has different degrees of two in multiple cycles. The decline was down, but the range was different. It may be that the market risk preference gradually weakened during the process of liquidity tightening, accompanied by some other event-related influences, triggering another decline in the equity market;
3. From the entire interest rate hike cycle, the last four major U.S. stock indexes ended the interest rate hike cycle with a close increase. After the cycle started, it is likely to start to adjust, and then gradually recovered and rose, and fell at the end of the cycle;
In addition, there may be a big difference behind the "fast" and "slow" interest rate hike cycles.Ned Davis Research wrote in a report earlier this month that Historically, the S&P 500 index could rise on average 10.5% in the year after the start of the "slow" rate hike cycle, while the average decline of 2.7% in the "fast" cycle.
Image source: Network
Median U.S. stock earnings in the first year of the "slow" cycle were 13.4%, while in the "fast" cycle, it was only 2.4%. The median , which had the largest market decline in the "slow" cycle, was 11%, while it was 12.1% in the "fast" cycle.
Ned Davis Research predicts that the Federal Reserve is expected to raise interest rates 4 or more at the remaining seven interest rate meetings of the Federal Reserve in 2022, and at the same time begins to reduce its balance sheet size - This speed is enough to classify this round of interest rate hike cycle into the "fast" cycle category.
3. In the context of the Federal Reserve's interest rate hike, which sectors contain opportunities?
1. Bank
Morgan Stanley strategists pointed out: Rate hikes pose a threat to stocks that rely on economic growth, but is a good thing for banks, because the rise in long-term interest rates allows banks to increase profits through low-cost lending and high-interest rate lending.
Related investment targets include: Bank of America , JPMorgan , Goldman Sachs , Citi , Wells Fargo etc
2, gold
Tongwu Securities said that gold performed strongly in the interest rate hike cycle, and its price trend has a significant reverse change in US bond 's actual maturity rate. However, when policy changes lead to changes in basic supply and demand, the correlation between gold prices and the Federal Reserve's interest rate hike will be greatly reduced. In addition, gold can resist the risk of high inflation well, and and inflation and interest rate hike cycles are concurrent, which is also one of the reasons why gold performs well in the interest rate hike cycle.
related investment targets: Barrick Gold, Newmont Mining, Goldcorp, Eagle Mining , etc.
3, insurance
The reason why the Federal Reserve's interest rate hike is beneficial to the insurance industry is mainly because 80% of the funds allocated for insurance are on fixed income assets. Therefore, when the Federal Reserve raises interest rates, the fixed income assets return on investment will also increase accordingly, thereby increasing the value of insurance companies.
Piper Sandler analyst John Barnidge said that The possibility of interest rate hikes is good news for insurance companies , especially life insurance companies. He pointed out that rising 10-year Treasury yields and improved outlooks for the epidemic are factors that benefit insurance companies.
related investment targets: AllStar Insurance, American Qianjin Insurance, American International, Metropolitan Life , etc.
4, industrial
4, industrial
Goldman Sachs believes that after the first rate hike, industrial stocks in the U.S. stocks performed better than other industries on average.
Related investment targets: Boeing , General Electric, Caterpillar and United Pacific etc.
5, consumer discretionary
With the increase in employment rate and the increase in wages, consumers have more disposable income to buy goods that are considered "necessary" or daily consumer goods.
related investment targets include: Nike, Marriott International , Ford, Jia Debao , McDonald's , etc.
Hiang License and disclaimer: The above content only represents the author's personal position and viewpoint, and does not represent any position of Huasheng, and Huasheng cannot confirm the authenticity, accuracy and originality of the above content. Before making any investment decision, investors should consider the risks of investing in their own situation. If necessary, please consult the advice of a professional investment consultant.Huasheng does not provide any investment advice and does not make any commitments or guarantees.
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