"Midnight: US Stocks Down 200 Points, Depreciation and Tech Stocks Rise, Impacting A-Share Market Style"

Waking up from a good night's sleep, it's another weekend morning. The A-share market is on a two-day break, but the US stock market is not calm. In the early hours of this morning, the Dow Jones Industrial Average fell by another 200 points.

Although the Nasdaq Composite and the S&P 500 indices saw slight increases, the stock markets of Europe, which closed earlier, including Germany, France, and the UK, all experienced declines.

It appears that under the current circumstances, the stock market is still far from tranquil. Until the Federal Reserve's interest rate hike is settled, the fluctuations in the stock market will remain significant.

To make matters more unpredictable, the US Dollar Index has also fallen recently.

01

This week, the United States released its latest CPI and PPI figures. The CPI reached 7.0, setting a new 40-year high, while the PPI recorded 9.7, still at a high level. Under these circumstances, speculation about the Federal Reserve's interest rate hike is intensifying.

In the middle of last year, when there was no clear timeline for reducing the scale of bond purchases, some people had already begun to predict that the Federal Reserve would raise interest rates in the future, with the earliest predictions suggesting a rate hike in 2023.

However, not long after, some started to predict that the Federal Reserve would raise interest rates by the end of 2022. As inflation data continued to rise, discussions about the Federal Reserve raising rates sooner became more frequent.

Recently, the topic of discussion has shifted from whether there will be a rate hike in 2022 or 2023 to how many times there will be a rate hike in 2022. The general consensus predicts three rate hikes, but some believe there will be four, and the most recent speculation suggests there could be as many as five.

Sometimes it's amusing to observe that so-called economists and international investment banks can be quite capricious in their judgments. As inflation data rises, their outlook on future inflation levels becomes increasingly pessimistic, and they view the urgency of interest rate hikes as increasingly important.But in reverse thinking, the current level of inflation may actually be difficult to sustain, and it is possible that inflation will slowly decline in the future, which has been verified in our country over the past year.

A large part of this round of inflation comes from the stimulus to the economy after the outbreak of the epidemic, but as the epidemic control gradually becomes effective, liquidity will also be appropriately tightened, and our country's inflation is falling back.

The United States is about half a year behind China's economy in this economic cycle, recovering from the economy a bit later than us, experiencing inflation a bit later than us, and also tightening the faucet a bit later than us. Therefore, although the current inflation in the United States is relatively high, it may see a significant decline in inflation after one or two quarters.

02

The performance of the stock market is also not as much change as we see every day, it can only be said that there is a certain amount of fluctuation.

For example, the Dow Jones Industrial Average fell by 200 index points last night, but the whole week only fell by 0.88%. Among the five trading days, there were three trading days with a longer lower shadow line, all of which were first down and then up during the day.

Under the doubts of interest rate hikes, technology stocks are more affected, but the Nasdaq Index only fell by 0.28% this week, far lower than the 4.53% drop in the previous week.

This weekend, Sister Wood also issued a declaration that she will build a position in growth stocks, and it seems that she also believes that the impact of interest rate hikes and inflation on technology stocks is slowly passing.

03The future trend of the U.S. stock market actually has two significant uncertainties.

The first one, as already discussed, is whether the U.S. can raise interest rates on schedule and how many times. Currently, this is still very uncertain. If the pace of economic recovery in the U.S. slows down in the coming months, economic data falls back, and the risk of economic downturn further increases, the expectation of interest rate hikes will inevitably weaken. If inflation comes down and employment data also comes down, it is believed that the Federal Reserve would not dare to raise interest rates lightly.

The second issue lies in the fact that, looking back at the past process of interest rate hikes, we find that the impact on the stock market is not as great as imagined. The greatest impact is often during the discussion phase before the rate hike, that is to say, before the news is confirmed, the impact on the stock market will be relatively large. Once the news is confirmed, the impact on the stock market is actually positive.

At the beginning of this century, the U.S. had a round of interest rate hikes, which occurred from 2003 to 2005. However, during the rate hike, and even after the rate hike was completed, until early 2008, the U.S. stock market continued to rise unaffected.

The most recent round of interest rate hikes was from 2015 to 2018. It was only at the very beginning that the Nasdaq index experienced significant fluctuations for three months, and then the U.S. stock market has been moving upward until now. In fact, from early 2009 to the present, the U.S. has gone through a long bull market that has lasted for more than a decade.

In the most recent week, both the Hang Seng Index and the Hang Seng Technology Index have also experienced consecutive increases. This seems to indicate that even if the U.S. raises interest rates, the fundamentals are still the most important. After a year of decline, the Hang Seng Technology Index finally has the opportunity to be repaired in 2022.