The inflection point of the Federal Reserve's interest rate hike boots has landed, and the interpretation of the public offering ** is coming.
The overall attitude of the interest rate meeting was dovish. In response to the reasons for the Fed's "relaxation", the probability and pace of future interest rate cuts, the impact on U.S. stocks, A-shares and other assets, as well as investors' operational suggestions and other market concerns, some ** companies expressed their views.
In the view of public offering institutions, the Fed's attitude is dovish, and interest rate hikes are basically over. In the short term, the U.S. dollar index and U.S. Treasury rates are expected to weaken**, and U.S. stocks may continue**. With the trend of U.S. bond interest rates falling, it is good for A-shares.
Improving inflation has pushed the Fed from hawkish to dovish.
In the early hours of this morning, Beijing time, the Federal Reserve continued to stop raising interest rates at the December FOMC meeting, and the benchmark interest rate remained at 525-5% level, which is the third pause in rate hikes after the July hike.
Stimulated by this news, the three major U.S. stock indexes all rose more than 1%;Among them, the Dow Jones hit a record high, and the Nasdaq and S&P 500 hit new highs since the beginning of last year.
J.P. Morgan Asset Management believes that the Fed kept the interest rate target range unchanged at its last meeting this year, and made a clear bias in the wording of the statement, suggesting that the current round of interest rate hikes has ended. The statement noted that the pace of economic activity has slowed compared to the booming third-quarter growth figures.
Second, the statement stressed that inflation has "eased over the past year," indicating that it has done some work to curb inflation, but still believes that the current level is still high. More notably, it added the word "any" to the phrase "determine the extent of any additional policy tightening", almost indicating that there will be no rate hikes in this cycle.
In J.P. Morgan Asset Management's view, the shift in policy expectations this time is clearly driven by improving inflation, and while the committee may still be uneasy about the current level of inflation, they seem to believe that the downward trend in inflation will continue into next year, allowing the Fed to keep interest rates steady.
In this regard, Hu Chao, manager of Tianhong, said, "The core of the Fed is to control inflation, so Powell will be hawkish every time he says to suppress market expectations, but this time the Fed's statement is more than expected, and we judge that the Fed has confidence in the smooth downward movement of inflation next year." ”
The published dot plot shows that the current rate hike cycle is complete, and we expect a 75 basis point rate cut in 2024, which is three rate cuts next year, which is higher than expected in SeptemberThe market expects five rate cuts next year, as early as March. We don't think investors need to bet too much on the timing of rate cuts, but the Fed's dovish tone is a very positive sign. Hu Chao further said.
When will interest rates be cut?Probably a little later than expected. J.P. Morgan Asset Management judged that the timing of interest rate cuts in 2024 may be delayed from the first quarter expected by the current interest rate** market.
In the press conference after the meeting, Fed Chair Jerome Powell stressed that the Committee believes that the current policy rate is restrictive and that inflation should return to trend over time. If economic growth remains strong and the labor market remains tight, the committee will remain cautious about cutting rates prematurely.
Morgan Stanley** analyzed that after the Fed interest rate meeting, the overnight 10-year U.S. Treasury yield fell 15bps to 402%, once broke through 40%, 1-year SOFR OIS down about 25bps to 485%, the U.S. index broke through 103 downward, and the market further revised its interest rate cut expectations, and it is expected that interest rates will be cut in March next year, with 150bp for the whole year.
For the probability and rhythm of future interest rate cuts, Fu Beijia, manager of HSBC Jinxin Shanghai-Hong Kong-Shenzhen** and Hong Kong Stock Connect, said that the optimistic scenario for next year's interest rate cut is that the US economy will recession and inflation will fall faster than expected, and the Federal Reserve will carry out preventive interest rate cuts in the first half of the yearThe pessimistic scenario is a crisis mode, where the global recession resonates and triggers a large level of risk, and the Fed is forced to cut interest rates in the second half of the year, but the market will experience a large **.
For U.S. inflation, the company recommends paying attention to its future uncertainty. In Morgan Stanley's view, the Federal Reserve's attitude is dovish, the interest rate hike is basically over, and the interest rate cut is more optimistic than the inflation cooling, but the expectation of 3 interest rate cuts is not necessarily stable, and a small number of ** for the 75bp swing may lead to a change in the number of interest rate cuts, the market is likely to continue to trade in the short term, and U.S. bonds may continue to decline, and there is an opportunity for the yield curve to steepen in the first half of next year, but it is also necessary to pay attention to the possibility that the subsequent inflation will cool less than expected.
Huatai Berry** also said that at present, inflation control in the United States has indeed achieved certain results. Headline PCE inflation in the United States has fallen from 7% in June last year to 3% in October this year, and is getting closer to the 2% inflation target. (Data**: CICC: Will the Fed cut interest rates early?)》2023-11-30) However, the Fed cannot "sit back and relax" yet. Because after all, the past does not represent the future, and it is still unknown whether US inflation will continue to decline in the next 3 to 5 months.
* and U.S. stocks ushered in the allocation window.
So if, in March next year, the Fed does cut interest rates, which assets we may be able to pay attention to in advance?
Some ** companies believe that in the context of the end of interest rate hikes and interest rate cuts, the future may be a window period for large types of asset allocation.
Huaan is particularly bullish on allocation opportunities in U.S. stocks, and AH shares will also benefit from valuation repair due to the Fed's policy. First of all, stay optimistic. In terms of monetary attributes, the People's Bank of China continued to buy gold, supporting the performance of gold prices. In terms of financial attributes, the dovish Fed interest rate meeting continued to drive the US dollar and US Treasury interest rates**.
Second, the Nasdaq sector will benefit from the Fed's monetary policy easing at the valuation level, and then focus on the resilience of economic fundamentals. Valuation pressures on the Hang Seng Technology and Hang Seng Internet sectors are expected to ease.
The main risk in the future is that inflation will not go down smoothly, and it needs to be tracked according to high-frequency data. The recent pullback in oil prices has made an important contribution to the downward trend in CPI for two consecutive months.
Based on the judgment of "inflation falling, no recession", Hu Chao remains optimistic about the US market. He believes that the U.S. stock market may be a long-term trend.
Standing at the current point in time, we tend to believe that the process may fluctuate, but in the long run, there is still room for U.S. stocks. Hu Chao looked forward to the market outlook, "For this kind of mature capital market, there is no need to care too much about whether the entry point into the market is high or low, and assets are mainly returned through the appreciation of time." We recommend that you invest regularly and hold for a long time to gain long-term growth returns from U.S. stocks. ”
In terms of specific beneficiary assets, Zhou Jing, manager of Huabao, believes that in the next year, the U.S. technology sector is still worth paying attention to, especially small and medium-cap technology stocks. This year, U.S. technology stocks are mainly concentrated in seven leading technology stocks, and in the future, U.S. technology stocks may spread from leading stocks to non-leading stocks.
In the interest rate hike cycle, the valuation of small and medium-sized technology stocks has been suppressed more severely, and when interest rate cuts exceed expectations, the strength of small and medium-sized companies may also be greater than that of animal husbandry. Zhou Jing judged.
In J.P. Morgan Asset Management's view, the Fed's willingness to be more flexible in monetary policy means that the likelihood of avoiding a sharp recession has increased, which is good for both investment-grade and high-yield corporate bonds;A peak in Fed rate hikes could also benefit U.S. equities and Asia**, and a potential decline in cash yields next year could prompt investors to turn more attention to higher dividends**.
Huatai Barry** reminded that from the perspective of previous interest rate cut cycles, the performance of U.S. stocks depends on whether the U.S. economy will recession in the process of cutting interest rates. At present, the jury is still out on whether the US economy will be able to achieve a "soft landing" after raising interest rates. In addition, the current valuation of U.S. stocks is not cheap, so it may be necessary to be cautious about the next performance of U.S. stocks.
As for **, Huatai Berry ** believes that the historical performance in the interest rate cut cycle is not as prominent as US bonds, but in the long run, there may still be a certain allocation value, and the geopolitical tension + de-dollarization wave may become a catalyst for the long-term.
The investment value of A-shares and Hong Kong stocks is expected to be revalued.
In the view of ** company, with the gradual shift of the Federal Reserve, it will also have a certain boost to A-shares.
Huatai Berry** pointed out that if the United States cuts interest rates, the interest rate gap between China and the United States is expected to gradually narrow, which is good news for RMB assets. The pressure on foreign capital outflows is expected to weaken, and the opportunities for A-shares may outweigh the risks next year.
In terms of domestic assets, Huaan** also said that with the Fed's policy to loosen, the pressure of RMB depreciation has been reduced, which is expected to bring about valuation repair at the domestic index level, and under the combination of weak domestic economic recovery + loose overseas liquidity, it is recommended to pay attention to investment opportunities in SSE 180, CSI 300 and high-growth elastic ChiNext 50 related indexes. At the industry level, it is recommended to pay attention to the field of science and technology innovation chips driven by prosperity + valuation improvement expectations.
For A-shares and Hong Kong stocks, Baoying** believes that the expectation of the end of the Fed's interest rate hike cycle is significantly positive for the A-share and Hong Kong stock markets. This means that the strong "monetary faucet" of the US dollar is no longer tightened.
The Fed's interest rate hike is over, and even the future rate cut begins, US Treasury yields cannot remain high, and the dollar index is no longer strongOn the other hand, the trend of the return of the dollar to the United States will also be curbed, and China, as a representative of emerging markets, is expected to revalue the investment value of A-shares and Hong Kong stocks.
Fu Beijia pointed out that the sensitivity of interest rate cut expectations to U.S. stocks, Hong Kong stocks, and A-shares has decreased sequentially. We emphasize that the pace and slope of the economic recovery determine the direction of the market, and the Fed's interest rate cut cycle and pace affect the market amplitude, and geopolitical risks amplify the disturbance. Long-term interest rates have peaked, and it is a definite trend for the interest rate center to move downward next year, so it is directly positive for U.S. stocks and Hong Kong stocks in the direction.
However, in terms of rhythm, Fu Beijia bluntly said that he paid more attention to whether the expectation of interest rate cuts was rushed. "This will amplify the amplitude of the market phase. For A-shares, the stronger directional effect is that the domestic interest rate space can be expected to be further opened after the Fed cuts interest rates, so there will be a slight lag in transmission. ”
Editor-in-charge: Tao Jiyan |Review: Li Zhen |Supervisor: Wan Junwei.
*: China ** newspaper).