The Federal Reserve (Fed) does not rule out a rate hike of 2 yards at a time, with a rate hike unseen since 2000 to cope with the high inflation, but why the US stock market has not been hit? Analysts believe that a reliable Fed is a strong Fed.
St. Louis Fed President James Bullard said on Tuesday that the Fed must accelerate rate hikes to take aggressive action to control inflation, following Fed Chairman Powell announced on Monday that a 2-yard rate hike would not be ruled out. , he also reiterated that the federal funds rate should rise above 3% this year.
Since the Federal Reserve raised the federal funds rate by 25 basis points last week and started the interest rate hike cycle, US stocks have rebounded sharply. Putting aside short-term shocks, US stocks are calmly responding to the Fed’s interest rate hike cycle on Tuesday (22nd). , S&P closed up 1.13% to 4,511.61 points, back above the 200-day moving average, recovering most of the lost ground since the end of February.
Tom Lee, founder of Fundstrat Global Advisors, said the Federal Reserve’s announcement of forward guidance and the possibility of a substantial rate hike at its May rate meeting was welcomed by investors.
Investors weigh the economic outlook and see a credible Fed policy as a strong Fed, and higher interest rates are better than entrenched inflation, Lee noted.
Importantly, the S&P has pulled back nearly 15% from its Feb. 24 low, which means a lot of bad news has been priced in, meaning the risk-reward outlook has changed since early 2022, said Tom Lee, founder of Fundstrat Global Advisors. There has been improvement, but in the current market environment, investors should not try to make big bets, as the market might still be volatile.
Pepperstone analyst Chris Weston pointed out that the Russian-Ukrainian war fueled inflation fears and the prices of crude oil and other raw materials soared in wildly volatile trades, and although that meant a rough sell-off for stocks, fund managers appeared to be doing well. Hedging, holding a lot of cash on the sidelines, the stock market does have a stock rotation phenomenon, with crude oil prices soaring, energy stocks rallied, and utility defensive stocks increased.