Fed Rate Hike: 20% Stock Plunge? Impact on A-Shares & Funds?
The Federal Reserve raises interest rates,and the stock market may fall by 20%,and in extreme cases,it may even fall by 50%!
Is it really the case?
Recently,the topic of the Federal Reserve's interest rate hike has been very popular in the market.Some authors predict that the U.S.stock market will fall rapidly in the future,and the decline may reach 20%.Others predict it may reach 50%.
However,Caishuode Mingbai believes that this is a bit of a groundless worry.
01,When will it fall
Many people predict that after the Federal Reserve raises interest rates,the U.S.stock market may fall by more than 20%,and it will affect the global stock market,including our A-shares.
As for when the Federal Reserve will raise interest rates in the future,there is no judgment; how long after the rate hike will the stock market fall,there is also no judgment.
It is clear that no one can say the exact time point,but it is said that once it falls,there may be a decline of 20% or even higher.
Such predictions are actually very unrigorous,
because there is no stock market that keeps rising,and one day it will fall.A decline of 20% or 50% is something that will inevitably happen in the future.Suppose the U.S.stock market rises by 50% on the current basis in the next three years,rises by 70% in the next five years,or rises by 100% in the next ten years,and then there is a 20% decline,then should we stay away from the stock market now?So,simply judging that the future will fall is of little significance.
02,U.S.stock market bubble
When everyone is predicting a decline,they all mention one thing,which is the current bubble in the U.S.stock market.
For example,I saw an article that mentioned that recently five indicators have shown that the U.S.stock market is in a bubble.These five indicators include the state farthest from the three-year moving average,the fear and greed index is in a state of extreme greed,the state of fund managers' positions is mainly bullish,the high margin debt indicates leveraged entry into the market,and the proportion of leveraged ETFs doing long is far higher than that of short,
all five indicators show that it is in a bubble state.It sounds very reasonable.
But I think friends who invest need a little more logic at the bottom of investment.
Similar to these articles,my first reaction after reading is that these five indicators are in a bubble state,will the stock market definitely fall?
Obviously not.
So,how many indicators are there to judge the stock market bubble in total?
If these 5 are not enough to determine the decline,should there be another 5,or 15,are there other indicators that are not overheating yet?In reality,using some data to predict the rise and fall of the stock market is a common method used by many experts,but the problem is that these are often not sufficient and necessary conditions.
Let's look back and see that the U.S.stock market has been in a long-term bull market for more than a decade.If you use a search method to set a point in time,set any year in the past,and then search.
Everyone will see that during that period,predictions about the U.
S.stock market will always find some of the same views,come up with various reasons,and conclude that the U.S.stock market is already at a high level and will fall in the near future.That is to say,there has always been the current statement in the past,and the current statement may continue to reappear in a few years.
Unfortunately,although the U.S.stock market has fluctuations,it has not truly fallen by 50% or 20%.
03,the impact of interest rate hikes
So does it mean that interest rate hikes will have no impact on the U.S.stock market?
I don't think so.If the Federal Reserve raises interest rates,it will definitely have some impact on the U.S.stock market.
Looking at this year,there is no possibility of the Federal Reserve raising interest rates.The fastest interest rate hike that can be predicted now should also be at the end of next year,or even 2023.There are still many factors that may change in the next one and a half to two years,and whether the Federal Reserve can raise interest rates still has a lot of uncertainty.
Even if interest rates do rise in the future,if we look at past cycles of interest rate hikes,we will find that it's not the case that the stock market falls as soon as interest rates begin to rise.Instead,it's in the middle or even the later stages of the interest rate hike cycle that the stock market tends to decline.So,even if interest rates start to rise by the end of next year,the stock market will not immediately fall.That is to say,from now on,in the next year or two,the U.S.stock market will still experience fluctuations and will gradually rise.If it rises and then falls by 20% or 30%,it might still be above the current level.
04,Golden Pit
To take a step back,suppose that wave really falls by 20% or 30%,or even 50%,lower than the current position,that's not a big problem either.
Because if we look back at the U.S.stock market over such a long period,it's not that it hasn't fallen by 20% or 30%; in 2008,it even fell by more than 50%.However,such significant declines of more than 20% are always opportunities.
The U.S.stock market often doesn't take too long to return to high levels.
The fastest recovery was in March of last year.The U.S.experienced multiple circuit breakers,and even so,it only fell for a month,and then it took two or three months to slowly recover.
So,I think it doesn't make much sense for everyone to predict now that a 20% or 30% decline will occur due to future interest rate hikes by the Federal Reserve.
If there is a real decline,remember to seize the golden opportunity.
05,Impact on A-sharesWill it actually have an impact on China's stock market?Will it cause significant losses to the funds we hold?
If the U.S.stock market does indeed fall,it will definitely have an impact on us.
You may have noticed that several declines in the U.S.stock market have had a more noticeable impact on us,but we cannot predict when the next decline will occur.
Moreover,for A-shares and domestic funds,even if the U.S.stock market does not fall,it does not necessarily mean that things will be good.
Therefore,
there are actually many factors that affect our returns,and we should not just focus on whether the Federal Reserve will raise interest rates or whether the U.S.stock market will fall.If you want to be more stable and achieve better returns in fund investments,the focus should not be on U.S.interest rate hikes,but rather on how to select good funds,funds that suit oneself,and then have a set of investment disciplines to help you earn returns.
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