To The Moon

The Fed has been raising interest rates for some time now, but the U.S. stock market seems to have digested the negative sentiment of the rate hike, and the U.S. stocks seem to be rebounding in the last two months. However, the rebound in the past two months was indeed stronger than I expected, but that's the way it is with "market estimation". Even if you predict the right time, you may not be able to predict the magnitude of the ups and downs of the market.

From Figure 1, we can see the path of the Fed's rate hike cycle over the years. I can conclude that the Fed's rate hike cycle is generally quite long, at least an average of about a year. When interest rates get higher and higher, the longer they last, which is actually not very friendly to the stock market. Because higher interest rates will cause stocks to lack sufficient attractiveness, especially when the current valuation of U.S. stocks is actually quite high, investors tend to think that since the money market or time deposit rates are good, why risk investing? People have an aversion to risk, so often rising interest rates will suppress stock market rallies, if given long enough.

So I would like to take this opportunity to remind you that the current rebound in U.S. stocks may end at any time, although there may still be some room for rebound in December because the performance of U.S. stocks in general will not be too bad in December, this is based on the results of historical data, I have also written articles on related topics before, you can refer to them if you are interested. "The SPY is the ETF that tracks the S&P 500 index, while the QQQ is the ETF that tracks the Nasdaq index. Just a short time ago when Powell gave a somewhat dovish speech, despite the current rally in U.S. stocks, there was a fishy flow of funds from these two ETFs, with an overall net outflow of $10 billion for the week, the largest net outflow since 2022.

As for the recent data released by the Investment Bank of America, it appears that cash is now beginning to be favored, as more of the money that used to roam the market looking for returns has begun to move to the cash money market. The third quarter was only $64 billion, but as of November 22, the fourth quarter has come to $210 billion, and if the projection continues at this rate, the entire fourth quarter is estimated to come to nearly $400 billion by the end of the year. So from the data alone, I think investors' risk appetite is quietly shifting to the middle again.

Finally, please allow me to make a bold and subjective judgment, I think that in this macro background and boom, coupled with the net outflow of U.S. stocks if the fermentation or even worsening, the current round of the U.S. stock rebound is likely to end at the end of this quarter, the first quarter of next year 2023 may see the U.S. stock rebound after the turning point, here I suggest that we do a good job of risk management, after all, if you can reduce and After all, if you can reduce and lower the risk, in fact, in disguise is also "earn". I think this topic is worth thinking about and self-judgment of investors.

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