To The Moon

$NASDAQ(.IXIC)$

"Soft landing” scenario no longer a given as hawkish Fed up the ante. The Federal Open Market Committee has, in a widely expected move, hiked the Fed Funds rates by 75 bps to 3.25% in the latest policy meeting. Based on the Summary of Economic Projections (SEP) table, the committee now expects the Fed Funds rate to peak at 4.6% by end-2023 (up from 3.8% in the June SEP estimates) and 3.9% by end-2024 (up from 3.4% in the June SEP).

In the press conference, Fed Chair Jerome Powell made it clear that bringing inflation back down to 2% remains paramount as the central bank seeks to restore price stability to the economy. He also cautioned that the likelihood of a “soft landing” for the American economy has diminished as restrictive policy persists for longer.

Growth equities – stuck between a rock and a hard place. The Fed’s resolve in containing inflation through hawkish rate hikes is negative for the outlook of growth equities in the coming months as rising cost of capital weighs on valuations. There is no question about that. And as with all things in life, there is a price for everything. Since the start of the year, valuation for the global technology sector (used as a proxy for growth equities) has already contracted by 31.4% as investors priced-in impending Fed tightening and rising bond yields.

i believe that many of the rates concerns have been sufficiently priced-in within the growth equities space. And while this segment will face volatility in the upcoming 3-6 months, the risk-rewards look fair from a 12-month perspective. Investors should hang on to their existing positions.

@TigerStars

DYODD