It was as expected. The US Federal Reserve (Fed) stepped on the brakes to raise the benchmark interest rate in 15 months. However, uncertainty about monetary policy appears to be increasing. Along with the announcement of the interest rate decision, the Fed hinted at the possibility of two more rate hikes within the year, but the market does not immediately believe that.
The artificial intelligence (AI) craze that has intensified with the advent of ChatGPT is blowing the heat for big tech stocks like Nvidia and Apple one after the other. Microsoft (MS) is no exception. Active investments in AI, such as an early partnership with OpenAI, the developer of GPT chat, are gradually producing results and are on the rise.
Despite hints of further progress… Mayor “I can’t believe it”
On the morning of the 15th, Korean time, the Fed announced that it would freeze interest rates at the current level of 5.00-5.25% after the regular meeting of the Federal Open Market Committee (FOMC). It’s like taking a ‘coma’ for the first time in the interest rate increase that has been happening 10 times in a row since March last year.
The Fed explained the reason behind the rate freeze, saying that recent economic data indicates that economic activity continues to expand at a moderate pace, while the banking system is sound and resilient, but there will not be a tighter credit environment is a stress on economic activity, employment and inflation ■ probable diagnosis.
Perhaps the interest rate forecast presented by the Fed is more impressive than the interest rate freeze. The Fed has predicted a final rate of 5.6% this year. This is an increase of 0.5 percentage points from 5.1% in March, suggesting two further increases of 0.25 percentage points each by the end of the year.
Experts in the stock market consider the Fed’s rate hike as a rather hawkish decision, but evaluate that the adjustment does not imply confidence in the Fed. Fed Chairman Jerome Powell’s expression “nothing is set in stone” is proof of that.
As a result, the market seems to be discounting the Fed’s suggestion of an additional hike, calling it a ‘curious’ claim rather than being nervous. It is in line with the observation that it will be difficult for the Fed to raise interest rates easily in a situation where the economic outlook is uncertain.
On the other hand, from the Fed’s point of view, it is inevitable to worry about the possibility of an ‘asset bubble’ that could occur while setting expectations in the market for an interest rate cut within the year. All in all, the uncertainty surrounding the Fed’s monetary policy in the second half of this year is very likely to remain high.
Cho Yong-gu, a researcher at Shinyoung Securities, predicted, “When estimating the real interest rate trajectory given the underlying prices, there is a high possibility that an additional interest rate increase will be made next month,” but “the need weakens after that.” Accordingly, it can be seen that the actual increase within the year is only one (0.5 percentage points) instead of two, and the last live ammunition is very likely to be a blank shot.
The AI frenzy is scary… MS is also joining the all-time high price march
The momentum of the AI explosion brought about by ChatGPT is incredible. It raises investment sentiment for technology stocks to the max and leads the rise in large technology stocks. Following Nvidia and Apple, MS is rallying and writing new highs every day.
On the 15th (local time), the stock price rose more than 3%, breaking the highest price based on the closing price recorded on November 19, 2021. MS stock has risen more than 45 percent this year alone . Investors give high marks to Microsoft’s AI investment and use of technology.
Microsoft started investing in OpenAI, the developer of ChatGPT, the starting point of this year’s AI crash, from 2019, and set a policy to invest an additional $10 billion early this year. It has already installed AI technology, led by ChatGPT, in all of its products, including search engines, and is stepping up as a leader in this field.
Wall Street is also raising its target price one after another, commenting favorably on Microsoft’s growth potential. JPMorgan raised its target price from $315 to $350, saying AI will drive demand for Microsoft products. According to Refinitiv, a US financial information company, 44 out of 53 Wall Street analysts responsible for analyzing Microsoft have given a ‘buy’ investment opinion.
