Will the slump in US stocks continue in 2023? Future uncertainty as seen from the November FOMC and strategies funded investors should take

The FOMC (US Monetary Policy Meeting), which the whole world is paying attention to, was held before dawn on November 3, Japan time, and it was announced that the interest rate hike in November would also be 0.75%, continuing from the previous time.
The 0.75% interest rate hike was as expected by the market this time as well, and there was no sense of surprise about the rate hike itself.
What was attracting attention at the FOMC this time was “how future interest rate hikes will be mentioned.”
Consider interest rate hikes that have been made in the past
It will take time for the effects of the 0.75% interest rate hike made 4 times in a row to come out
While watching the situation, we will consider future interest rate hikes
Since a statement to that effect was issued, speculation flowed that the range of interest rate hikes at the FOMC in December would move to shrink.
Stock prices rose when this statement was announced, and the market was enveloped in an optimistic mood, but the trend completely changed at the press conference held by Fed Chairman Powell that followed.

In other words, the view that interest rate hikes would be stopped early next year was the mainstream, but on the contrary, it became feared that interest rate hikes would continue to be carried out in the middle of next year, and stock prices reversed and plummeted.
Volatility (price range) was intense throughout the day, and at the end of the day, the S&P 500 fell sharply by 2.5%, and the NASDAQ centered on high-tech stocks fell sharply by 3.4%.
How will stock prices move if interest rates continue to be raised in 2023, and what strategies should investors take in response to that?

Interest rate hikes (rising interest rates) are a headwind for stock prices.
Chimata tends to focus on the “range of interest rate hikes,” but what is important is “until when” high interest rates will continue.
As interest rates rise, debt interest rates will of course also rise.
From a company's point of view,
It became difficult to make new investments,
Also, since interest payments on loans will also increase, it will cause profit pressure.
The longer this period continues, the more it will have a negative impact on corporate performance, and it will be difficult for stock prices to avoid this adverse effect.
Also, when interest rates are high, the trend of stock investment → bond investment also becomes more intense.
If interest such as 4% or 5% can be obtained by investing in highly stable bonds, there is no need to dare to invest in stocks with high risk (price movements).
It is natural to think that it is more cost-effective to earn an annual interest rate of about 5% on bonds with stable price movements rather than investing in stocks, taking big risks and obtaining yields such as 5% or 6%.
In any case, it can be said that the fact that high interest rate levels continue for a long time is not a happy thing for stock prices.

In 2023, like this year, the weak exchange rate continues, and there is a high probability that the full-scale rise in US stocks will be deposited.
However, for funded investors, on the contrary, it may be a good story.
This is because the perfect preparation period will continue for a long time.
The basic strategy for stocks is to “buy low and sell high.”
By buying as much as possible when it's cheap, you can get big profits from subsequent increases.
However, I can't stand that my assets don't increase as I thought
Wouldn't assets increase if you start (resume) investing after interest rate cuts have started
I think there are also anxieties and questions like that.
However, I would like you to avoid the option of quitting investing because stock prices are soft.
The history of US stocks up until now is that if it continues, the timing of an increase will come someday.
However, it's almost impossible to guess when that timing is.
As a matter of fact, it does not mean that stock prices will rise after interest rates fall, and there is a high possibility that stock prices will rise ahead of when the view that interest rate cuts will be carried out in the future becomes the view of many people.
Interest rate movements and stock price movements do not match.
That's why it's so hard to read movements.
The minimum we funded investors should do is

That's it.

What is important for funded investors is to simply honestly continue to accumulate funds regardless of the period when stock prices are sluggish.
No one knows how long this sluggish period will last.
There is a great possibility that the sluggish period will continue in 2024 and 2025.
Keep saving no matter how the market moves.
This will lead to huge profits in the future.
Also in order to continue saving
“Are you investing in a reliable fund with surplus funds?”
Please double check this once again.

Author: Hikaru Tomioka (FP Technician Level 2, Securities Foreign Staff Type 1)

Last updated on November 8, 2022