Rate Cuts, Sector Rotations & Selloffs

Throughout the recent couple of weeks, the stock market has experienced some really goofy price action spurred by mostly unusual or insufficient interest rate decisions.

Firstly, the BOJ decided to hike Japan interest rates for the first time in years, with an interest rate close to 0 in the past.

This allowed investors to carry trade, where they borrow yen for basically free and exchange for USD to purchase US equity.

You can see how the interest rate was literally negative or close to 0 for most of the 2010s onwards, with a sudden rise and increasing, to 0.25 basis points and beyond.

Following the BOJ rate hikes was the recent concerns of the US entering a possible recession, causing both pressure to the FEDs to cut interest rates, as well as a sector rotation into more defensive stocks or small-cap stocks that would benefit from lower rates more.

Not only did the major markets essentially shit itself, but the USD/JPY currency pair took a massive hit as well, losing close to 10% in just a couple days.

This was what the BOJ intended to happen as the JPY was extremely weak throughout 2024 (my brother went to Japan for holiday and bought alot of stuff lol).

With effects that largely impact companies conducting imports and exports with Japan, as well as those carrying out business in that country.

I will also be removing my exposure to Asia as I've mentioned before, Moomoo lacks proper Asia funds that I like, and their current situation is extremely volatile and risky.