Author: Li Ailin
From 50 basis points to 75 basis points, the Fed's rate hike expectations seem to have changed dramatically overnight, and investors seem to have completed psychological construction overnight.
"Suddenly, the market has reached a consensus." New York Stock Exchange trader Anderson (Timothy Anderson) explained to the first financial reporter, the May consumer price index (CPI) and June University of Michigan consumer confidence released on the 10th The index clearly shows that the inflation problem that the American people are most concerned about is still worsening."Federal officials must tell consumers and investors that they are serious about fighting inflation." Anderson believes that the expression of "serious" is to expand the rate of interest rate hikes.
As of press time, the CME Group’s FedWatch Tool showed that the probability of betting on a 75 basis point rate hike by the Federal Reserve on the 15th jumped from 34.6% the previous day to 95.8%. was 3.9%.
Goldman Sachs, JPMorgan Chase, Wells Fargo, Deutsche Bank, Barclays, Jeffrey and many other institutions have predicted that the Fed will announce a 75 basis point interest rate hike after the 15th. rate hike.
Correction?
In the past, the Fed has usually communicated as fully as possible with the market to avoid market volatility.Before the quiet period that began on June 4, a number of Fed officials, including Powell, expressed support for a 50 basis point rate hike this week and another 50 basis point hike in July.So why does the market think the Fed will "break its promise"?
Edward Moya, senior market analyst at brokerage OANDA, told China Business News that the Fed's change in attitude is actually correcting its mistakes."Powell has always misjudged inflation. If the Fed does not actively raise interest rates, there may be the risk of policy mistakes." He said that the Fed is trying to avoid the mistakes made in the 1970s, and the rate hike of 75 basis points will be A step in the right policy direction.
Hedge fund Pershing Square founder Bill Ackman (Bill Ackman) believes that this will be the Fed's opportunity to restore market confidence.He said that the fact that the Fed has allowed inflation to run out of control has caused the stock market and credit market to lose confidence in the Fed, and he even believes that a 100 basis point hike in June, July and subsequent interest rate meetings would be a better plan."The sooner the Fed hits its terminal rate, the sooner it can start to ease monetary policy and the sooner the market can recover," he said.
Can the market build up after the boots hit the ground?
U.S. stocks are racing ahead of the Fed, re-pricing the prospect of more aggressive rate hikes.Overnight, the S&P 500 index continued to drop in the bear market for five consecutive days, falling to its lowest level since January 2021, down more than 22% from its historical high in January.During the last bear market, the S&P 500 fell 33.9% from its previous high before starting to rebound.Separate data showed that the average bear market in the S&P 500 lasted more than 18 months.
Bank of America's latest monthly survey shows that hawkish central banks are seen by investors as the biggest tail risk facing the market, and a global recession is the second-biggest risk. Fund managers are more pessimistic about the outlook for the global economy and worry about stagflation The highest level since the 2008 financial crisis.The pessimism on Wall Street is worrying, Bank of America chief global equity strategist Michael Hartnett wrote in a report.
Moya told the First Financial Reporter that even if the Fed's boots land, it will be difficult for Wall Street to see any possible rebound in the short term.
Anderson believes that the financial market will happily accept a 75 basis point rate hike and may not see a rebound in U.S. stocks immediately, but the downward pressure on the stock market should be relieved to some extent.
This week is the central bank super week. In addition to the Federal Reserve, the Bank of England, the Bank of Japan, etc. will announce interest rate decisions. However, all countries face their own economic challenges, and it is more and more difficult to stay safe from global issues such as soaring energy and food prices and intensifying supply chain problems. ."The big central banks seem to be panicking themselves, and the market suddenly needs to accept this new era of high interest rates, so it makes sense for the stock market to have a big correction," said Carsten Brzeski, global head of macro research at ING. ."
【Editor: Cheng Chunyu】
