Chairman Powell speaks out about the “pigeon faction”! What assets should you pay attention to during the Fed's interest rate cut cycle?
Chairman Powell of the US Federal Reserve (Fed) avoided presenting specific guidance on when to cut interest rates for the first time on the 2nd,“dovish”It seems to show such an attitude. Chairman Powell also revealed that there has been considerable progress in the Federal Reserve lowering the inflation rate to policy targets.
Overall, more than half of financial institutionsThe first rate cut will be in SeptemberI anticipate that.
CitigroupInterest rate cuts of 25 bp in September, November, and December, respectivelyI'm predicting it. In June, the bank revised downward its previous forecast, which had been to cut interest rates 4 times from July. The main indicator that the bank is paying attention to is the unemployment rate, which rose moderately from 3.9% the previous month to 4% in May. Also, the inflation rate is expected to cool down in the next few months.
Similar to Citigroup, Goldman Sachs and Nomura Securities also anticipate that the first rate cuts will be in September.
CitigroupInterest rate cuts of 25 bp in September, November, and December, respectivelyI'm predicting it. In June, the bank revised downward its previous forecast, which had been to cut interest rates 4 times from July. The main indicator that the bank is paying attention to is the unemployment rate, which rose moderately from 3.9% the previous month to 4% in May. Also, the inflation rate is expected to cool down in the next few months.
Similar to Citigroup, Goldman Sachs and Nomura Securities also anticipate that the first rate cuts will be in September.
JPMorgan, which has a hawkish stance, predicts that the first rate cut will be in November since labor market momentum continues to be strong. The bank changed the number of interest rate cuts from 3 to 1 this year, but the employment situation is sluggish, and there is a possibility that it will take several months to cut interest rates.
The impact of the Fed's interest rate cuts on major asset classes is multifaceted.
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stocks
What is the impact of interest rate cuts on the stock marketIn a wide rangeIt's over.The Fed cuts interest rates and growth remains positiveWhen doing so, corporate capital costs drop due to interest rate cuts, profitability increases, and market trust and expectations also increase, soThe stock market is likely to riseThere is. Historically, in the Fed's interest rate cut cycleUS stocks outperform European stocks and Japanese stocksMeanwhile, emerging market stocks benefit from the depreciation of the dollar and the inflow of funds. However, stocks will turn negative when the Fed fails to cut interest rates and the economy falls into recession.
The impact of the Fed's interest rate cuts on major asset classes is multifaceted.
What is the impact of interest rate cuts on the stock marketIn a wide rangeIt's over.The Fed cuts interest rates and growth remains positiveWhen doing so, corporate capital costs drop due to interest rate cuts, profitability increases, and market trust and expectations also increase, soThe stock market is likely to riseThere is. Historically, in the Fed's interest rate cut cycleUS stocks outperform European stocks and Japanese stocksMeanwhile, emerging market stocks benefit from the depreciation of the dollar and the inflow of funds. However, stocks will turn negative when the Fed fails to cut interest rates and the economy falls into recession.
The impact of lower US interest rates on commodity markets is mainly influenced by changes in supply and demand and the US dollar exchange rate. Generally, interest rate cuts boost commodity demand. Interest rate cuts stimulate economic activity and not only increase consumption and investment in commodities, but also lower the cost of holding commodities and increase their attractiveness.
Meanwhile, Amelia's interest rate cuts also lead to a depreciation of the dollar, so in the case of dollar-denominated commodities, prices drop for holders of non-US currencies, and demand increases, boosting prices. Historically,Gold showed the most prominent performance in the interest rate cut cycleit's here. Since gold is a safe asset and also has the characteristic of not paying interest, interest rate cuts have had the biggest impact on gold. Other commodities, such as crude oil and industrial metals, are affected by supply and demand in the real economy, so if the economy decelerates and demand declines, commodity prices will also be pressured.
The impact of the Fed's interest rate cuts on the bond market is mainlyReflected by changes in yield and spreadIt will be done. Generally speaking, interest rate cuts lead to a decline in bond yields, and for investors who hold bonds, bond prices rise, and capital gains can be obtained.
Meanwhile, interest rate cuts also have an impact on bond spreads (differences in yield between bonds with different ratings and maturities). Interest rate cuts reflect deterioration in the economy and credit, leading to widening spreads, and investors demand higher risk premiums for low-rated, long-term bonds.
From a historical perspective,Interest rate bonds outperform credit bondsThen,Short-term bonds outperform long-term bondsThere is a tendency to do it.
Overall, in a continuous cycle of interest rate cuts,The advantage of bond assets before interest rate cuts is clearThen, US stocks followed suit. In the past 8 cycles, US bond yields continued to lead before the Fed cut interest rates for the first time, followed by US stocks and commodities.The initial interest rate cut by the Fed is an optimal trading period, and the probability that US bonds will rise is extremely high。
Typical products of ultra-long-term bond ETFs are under the umbrella of BlackRock iShares $iShares 20+ Year Treasury Bond ETF(TLT.US$So, they mainly hold US bonds with a term of 20 years or more. These bonds have a long term and are very sensitive to interest rate movements. Among ultra-long-term bond products, US bonds over 20 years old are held for a triple long period $Direxion Daily 20+ Year Treasury Bull 3X Shares ETF(TMF.US$Also, since leverage of 3 times is used, it would be suitable for using short-term market movements with clear market volatility.
Source: Moomoo, Allianz
ー MooMoo News Evelyn
This article uses automatic translation for some of its parts
Overall, in a continuous cycle of interest rate cuts,The advantage of bond assets before interest rate cuts is clearThen, US stocks followed suit. In the past 8 cycles, US bond yields continued to lead before the Fed cut interest rates for the first time, followed by US stocks and commodities.The initial interest rate cut by the Fed is an optimal trading period, and the probability that US bonds will rise is extremely high。
Typical products of ultra-long-term bond ETFs are under the umbrella of BlackRock iShares $iShares 20+ Year Treasury Bond ETF(TLT.US$So, they mainly hold US bonds with a term of 20 years or more. These bonds have a long term and are very sensitive to interest rate movements. Among ultra-long-term bond products, US bonds over 20 years old are held for a triple long period $Direxion Daily 20+ Year Treasury Bull 3X Shares ETF(TMF.US$Also, since leverage of 3 times is used, it would be suitable for using short-term market movements with clear market volatility.
Source: Moomoo, Allianz
ー MooMoo News Evelyn
This article uses automatic translation for some of its parts
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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