According to the previous Fed and Powell's remarks and working style, whether to raise interest rates based on data.
The current situation is that the banking sector is beginning to show the first signs of an economic crisis, which is caused by a run on the bank, but is ultimately the result of an interest rate hike. The purpose of the interest rate hike is to harvest the world's money while ensuring that domestic inflation and economic fundamentals are under pressure and not out of control; not to harvest the world while ensuring that a particular industry (such as the banking industry) is not in trouble. So as long as the banking industry can maintain the status quo, it should still raise interest rates.
On the other hand, the Fed's Powell may have softened his attitude. Powell, who comes from Wall Street, has always been on the conservative side, and he was inclined not to raise interest rates until 2021, and was very optimistic about the level of inflation, which led to the CPI reaching such a high point in the back. So it was only when inflation later overturned his inherent view completely that the FOMC meeting began to raise rates aggressively. So far, Powell's series of rate hikes have also had the implication of wearing out their welcome.
And near the beginning of 2023 Powell appeared rare dovish remarks think we must still have some impression, the situation at that time is the market call is very high, CPI re-entered the 6 range, and the general economic environment did not appear obvious signs of doves deterioration.
The latest situation is that the U.S. has some economic problems caused by the over-aggressive interest rate hikes. Not only the long-lasting layoffs of major technology companies, but also the current systemic risks in the domestic banking system due to the excessive rate of interest rate hikes, and there are already clear signs of spillover to the same industry in Europe. The measures that have been taken so far also allow quantitative easing with a margin for some European countries, and there are also signs of such domestic easing while raising interest rates in the United States. The government is operating very differently from the Lehman Brothers period, stating that it will protect depositors' funds, and financial institutions such as JPMorgan Chase are also fighting fires in concert, and all reacting exceptionally quickly.
Overall reference to the current U.S. CPI data and the general environment of the U.S. domestic and foreign ministries. Personally, I think Powell will become more cautious and more doves. Otherwise the above critical as the situation again becomes hawkish, not in the interests of all parties and their own job and ultimately the country's goals.
Accordingly, I may be inclined to press the pause button and delay the rate hike, or raise rates by 25 basis points less while giving the relevant government agencies extra time to put out the fire in the banking sector (which is also currently being done by the relevant US departments). There may be talk of first observing the improvement in the current banking sector situation, stabilizing the current fundamentals first, and then developing a subsequent rate hike strategy based on the situation.
Of course, once the situation eases, it is not impossible to sacrifice a few banks to reap the world. However, the harvest did not progress as it was expected, on the one hand, many countries for its harvesting method for early avoidance, resulting in the effect is not as good as before. For example, some countries reduced their holdings of U.S. Treasuries and shipped back gold in advance, for example, their dignitaries and economic sector officials had urgent needs to visit China but were not allowed to, for example, a major oil-producing country did not reduce the price of oil according to its needs, etc., for example, the situation between Russia and Ukraine has the [possibility] of de-escalation.
At this point hard rate hike forced harvesting should have a high probability of counterproductive effect.
Above, the Fed should not let itself first have a bigger problem without fully harvesting the world, so I personally tend to be more optimistic trend of this interest rate hike. (For reference only, not as investment advice)
Related Banking Stocks Associated Credit Suisse$Credit Suisse Group AG(CS)$ First Republic Bank$First Republic Bank(FRC)$ Alliant West Bank$Western Alliance(WAL)$ If there are no additional sudden shortcomings, there may be signs of reprieve because of the rate hike slowdown and relief policy. (Risky, for reference only, profit/loss at your own risk)
With an optimistic rate hike, the broad market index NASDAQ Composite$NASDAQ(.IXIC)$ tends to continue its upward movement.
Tend to Apple$Apple(AAPL)$ Nvidia$NVIDIA Corp(NVDA)$ recent stronger ticket will form upward force, pull strong large-cap stocks to complete the task of index upward.
Tesla$Tesla Motors(TSLA)$ Recent performance is not very strong and may not incline the bulls to pull Tesla to complete the index upside.
(Personal analysis is for reference only.)
Comments