The Federal Reserve has sent a strong signal that an interest rate hike is on its way. What is the market worried about?

2022-04-24 0 By

Federal Reserve Chairman Jerome Powell has delivered another bombshell to investors around the world as the outcome of the first FED FOMC meeting of 2022 surprised markets.At the Fed’s FOMC meeting in December, Powell gave a predictable timetable for rate hikes in 2022.The Fed’s view at the time was that the first rate hike of 2022 would come roughly in the middle of next year, in May or June, and that it would likely raise rates three times over the course of the year and three more times by 2023.The news didn’t have much of an impact on the stock market at the time because it was widely expected.Inflation in the US is serious, and anyone who cares about finance and economy knows that the Federal Reserve is bound to raise interest rates in 2022. Therefore, the market did not react much, but the US stock market rose a little because the boots fell.But the January 2022 FOMC meeting is different.Powell said a rate hike is likely in March, adding that “every FOMC meeting this year is likely to decide on a rate hike.”The market read too much into it.1. If the Federal Reserve raises interest rates ahead of schedule, the market that could survive until the middle of the year may end ahead of schedule. Some funds demand hedging in advance and withdraw from the stock market to buy deposits, bonds and other investment varieties that can bring more stability.2. The Fed has eight FOMC meetings a year, one this year and seven more.So some people read “every FOMC meeting this year is likely to decide to raise rates” directly to mean that the Fed will raise rates at every subsequent FOMC meeting, that is, seven times a year.Seven more?Not bad. That interpretation scared some timid investors out of the market.A flight of safe-haven funds naturally sent stocks plunging, especially at a time when nerves were already fraying.So will the Fed raise rates, and how many?First, interest rate rises are inevitable.The CURRENT CPI in the United States has reached a 40-year high. The high price rise in China may cause serious social problems. If we do not raise interest rates to curb prices, the CPI will break the records of 50, 60 or even 70 years, which is unacceptable for the United States.Therefore, it is certain that the Federal Reserve will raise interest rates in 2022, and the impact on the market is inevitable.Second, raising interest rates seven times is out of the question.Powell was talking about the possibility of a rate hike at every subsequent FOMC meeting, not every FOMC meeting as some interpreted it.The number of rate hikes is expected to be the same as the FOMC’s decision in December 2021, which is around three times and is unlikely to change significantly.You can’t raise interest rates seven times a year unless America is prepared to let the economy crash, and even the old man is not going to allow that to happen.So the market plunge was clearly driven by sentiment and a bit overdone.The logic of the U.S. stock market is different from that of the rest of the world.The Fed’s rate hike means that global hot money is flowing back to the US, which would be a big blow to any stock market with open capital.However, stocks are different, just started raising interest rates will indeed have a part of outflows from the stock market run to buy bonds and other financial investment, but as the dollar return the United States, some part of money will run into U.S. stocks, stocks will open up again this time model, not only can put down before the rise of return can also hit a record high.That is why stocks are in a perpetual bull market, as was the case with monetary tightening after the subprime crisis in 2008, as will be the case with interest rate hikes and tapering this year.What is financial hegemony?No matter whether the interest rate is raised or lowered, the U.S. stock market can make profits. The U.S. dollar, as a global trading currency, has this ability.The above reply hope to be useful to you, welcome to pay attention to, praise Wang Wu said your support is the best encouragement to the original!