To The Moon

A 75-point rate hike is no surprise, so why did the stock market plunge?

The $S&P 500(.SPX)$trend tells us Powell's attitude. Let's see what he says.

Powell: "My colleagues and I are strongly committed to bringing inflation back down to our 2 percent goal. We have both the tools that we need and the resolve it will take to restore price stability on behalf of American families and businesses. Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. "

From his speech, the rate hikes will not stop until inflation backs down to 2%. His aim is price stability, as high inflation poses great difficulties as it erodes purchasing power, especially with the rising cost of necessities such as food, housing and transportation.

Obviously, Powell is more concerned about when inflation will be addressed. More inflation, more rate hikes. Whether it's 50bp or 75bp, hawkish or dovish, he's not ready to talk about a pause.

It means rates will stay higher for longer.

That’s not great for risk assets, especially growth stocks and speculative investments. 

The terminal fed funds rate initially discussed will likely have to rise. And rates will have to stay high for longer because it takes time for policy to work through the economy and have a meaningful impact on inflation.

Now, all eyes will be on Friday’s nonfarm payroll data to see how tight the labor market remains. In the meantime, it seems the tightening continues, and stocks are not loving it. 

In the current situation, any benefits?

The interest rate is the base rate for all bonds denominated in a certain currency and compensates investors for their baseline economic risks. Hence if the market expects interest rates to rise, then bond yields rise as well, forcing bond prices, in turn, to fall. The reverse also applies.

United Fixed Maturity Bond Fund 1, managed by UOBAM and only exclusively available on Tiger Brokers.

Why United Fixed Maturity Bond Fund 1?

• 4.71% p.a. returns
• Zero management fees
• 6-monthly dividends
• 3-year lock-in period

More details here! Up to 4.71% p.a. Returns – Don't Miss This Bond Fund!

Click Here to Know details about the Exclusive Fund

About the returns: Based on current policies and interest rates, it is now at 4.95% p.a. Actual amount could vary. Currently, we expect a rise in 2023.