Bargain-hunting investors, who believe the hawkish season of global central banks has reached its peak, were reminded on Tuesday that they are playing a dangerous game.
The S&P 500 stock index saw its biggest growth since April 2020 in the two days leading up to the 4th, attracting traders betting on the possibility of a dovish turn in the US Federal Reserve, but temporarily fell 1.8% on the 5th. After that, although the decline was narrowed and ended at 0.2%, the President of the Federal Reserve Bank of San Francisco Daly denied the view that a change of attitude was near, and the reserve bulls were warned.
Indeed, recent events in the UK and Australia will require monetary officials to weigh their hawkish tendencies against the risks to economic and financial stability. But precisely because the credibility of policy is being tested at a time when price pressures remain at their highest level in decades, the Federal Reserve is about to push for its most aggressive tightening in recent years.
This suggests that the real inflation-adjusted 10-year US Treasury yield could easily rise again, triggering a sharp decline in risk assets sensitive to interest rates such as credit and equities.
“We are wrestling with the idea that markets are pricing in a sudden change from the Fed next year,” said Christian Muller-Grismann, head of asset allocation research at Goldman Sachs Group Inc. “We expect the Fed to continue raising rates into next year, so it may be premature to predict a sustained peak in real yields on long-term bonds,” he said.
Expectations that the world’s main central banks are ready to abandon their aggressive tightening stance have come as a surprise, with the Bank of Australia unexpectedly raising interest rates at its policy meeting on Thursday, and the Bank of England’s bond buying plans. received and enlarged. Traders pricing in a rate cut in 2023 also helped the recovery in major indexes, with the S&P 500 and Nasdaq 100 both posting gains of more than 3% on Monday.
“Federal Reserve Chairman Jerome Powell says the Fed will not change its stance until the path to slowing inflation is clear,” said Ed Christold, chief US strategist at Ned Davis. “Markets will continue to exhibit high volatility in response to economic data and official communications.”
The US jobs report for September and the US Consumer Price Index (CPI), released on Thursday and Friday, give fresh indications of how much room the Fed has to continue tightening without significant impact on the US economic cycle. is found.
news-rsf-original-reference paywall">Original title:
news-rsf-original-reference paywall">Wall Street Warns Fed Will Not End Bear Market (抜粋）
