The US Federal Reserve spooked markets yesterday by putting interest rates on hold but stressed they would be high for longer, with tech giants leading US stocks lower.
Previously, the US CPI rose to 3.7% in August, exceeding market expectations, which once triggered investor concerns.
But in my view, interest rate hikes and inflation are not a concern, and the real risk for US stocks should be the match between valuation and performance.
Take $Apple(AAPL)$, the king of US stocks, its revenue has declined for three consecutive quarters in 2023, and revenue is expected to continue to be negative in the next quarter:
The fundamentals have not improved, and even based on revenue growth over the years, Apple has already entered an era of low growth, and without the launch of blockbuster new products such as Apple Car, it will be difficult for the giant ship to boost its share price by growth:
The only thing to count on is buybacks, but Apple's current price-to-earnings ratio is as high as 29.5 times, and how much room for such a valuation multiple to increase before phone and PC sales return to growth?
Looking at the impact of inflation on the stock market, referring to the inflation history of the 1980s, although the CPI in 1980 was as high as 14.8%, significantly higher than the high of 12.3% in 1974, it did not prevent $S&P 500(.SPX)$ from coming out of the slow bull:
As the impact of interest rates on the stock market, 2004-2007, 2015-2018, the United States has entered the interest rate hike cycle, but the S&P 500 index did not fall, but rose simultaneously, and when the interest rate cut, the S&P 500 index often entered the bear market:
The principle behind it is generally that interest rate hikes represent a strong economy, and the performance of listed companies increases, while interest rate cuts often indicate economic problems.
Therefore, it is unnecessary to worry that high interest rates will hinder the performance of U. S. stocks.
Instead of focusing on the macro data, it is better to focus on the growth rate and valuation of the company, which are the main reasons for the rise and fall of the stock price.
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