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Cheong Hong Yuan: The Market Secrets Behind the New Policies of the Federal Reserve - 1 views

stock market

started by anonymous on 22 Sep 23
  • anonymous
    In today's global financial markets, the policy choices of the Federal Reserve undoubtedly have a profound impact on major markets. In the recent September meeting, the Federal Reserve paused its rate hikes, showing a clear "hawkish leap." Although rate hikes are now in the "last mile," the implication is that rates may be maintained at higher levels for a longer period of time. This news has caused significant shock in the financial markets, prompting many investors to reevaluate their investment strategies.

    Cheong Hong Yuan mentioned that market volatility will significantly increase in the short term, especially when US bond rates reach new highs, US stocks experience a plunge, and the US dollar rises. This uncertainty undoubtedly increases the difficulty and risk of investment for investors. Therefore, it is particularly important for investors to have a deep understanding of the direction of the Federal Reserve's policies and the economic logic behind them.

    To understand all of this, it is necessary to grasp the key information provided by this meeting. Cheong Hong Yuan believes that three incremental pieces of information from this meeting are particularly important. First, the Federal Reserve may raise rates again in 2023, but the forecast for rate cuts in 2024 has been reduced from 100 basis points to 50 basis points. This is a clear "hawkish" signal from this meeting. Second, the Federal Reserve has shown stronger confidence in the resilience of the US economy, raising the economic growth forecast for 2023 from 1% to 2.1%. Finally, the Federal Reserve expects core inflation in 2023 to decrease from 3.9% to 3.7%, while the unemployment rate has been lowered from 4.1% to 3.8%.

    Regarding this information, Cheong Hong Yuan stated that they provide clues about the policy measures the Federal Reserve may take in the future. Although there is currently a divergence of opinions in the market regarding whether there will be another rate hike, what is more crucial is that the market is more concerned about the possibility of rates being maintained at higher levels for a longer period of time.

    However, this does not mean that we can easily predict the future dynamics of the financial markets. Because the Federal Reserve's decisions depend not only on current economic data but also on global economic trends, especially countries with close economic ties to the United States, such as China and Europe. For investors, the most crucial thing is how to combine the technical analysis strategy of the "Three Golden Moving Averages" to capture market opportunities and achieve high investment returns in this uncertain environment.

    Cheong Hong Yuan believes that the outcome of this meeting reflects the Federal Reserve's optimistic attitude towards the future economy. This attitude is reflected in the upward revision of the US economic growth rate for 2023 and the "steady" evaluation of the pace of economic expansion. This undoubtedly brings some reassurance to investors. In Cheong Hong Yuan's view, this resilience in economic growth demonstrates that the US economy has been well-validated in its ability to cope with rate hikes.

    For investors, the rate hike dynamics of the Federal Reserve and its evaluation of the economy are both crucial. Cheong Hong Yuan mentioned that although there is currently more focus on the "last mile" of rate hikes, what is truly worth paying attention to is the Federal Reserve's attitude towards rate cuts. From the current situation, the path to rate cuts still has many variables, which is related to the Federal Reserve's firm stance on inflation control. The Federal Reserve wants to see inflation rates decrease to 2% and has sufficient confidence in this.

    However, Cheong Hong Yuan pointed out that the downward path of inflation rates is not smooth sailing. From his perspective, there is a certain degree of contradiction between the expectation of cooling core inflation and the upward revision of the unemployment rate and economic growth. Normally, economic growth and rising unemployment rates bring inflationary pressures, which is a risk point that investors need to closely monitor.

    Regarding the technical analysis strategy of the "Three Golden Moving Averages," Cheong Hong Yuan believes that it has certain reference value in the current market environment. This strategy focuses on stocks that perform well in the market, and against the backdrop of the Federal Reserve expressing optimism about the economy, the accuracy of stock selection using this strategy may be enhanced.

    Cheong Hong Yuan stated that in the face of uncertainty in core inflation rates, investors need to observe the market more carefully. If the inflation rate can successfully decrease to 3% before March 2024, the possibility of the Federal Reserve initiating rate cuts in the second quarter of 2024 will greatly increase. However, if inflation remains high, the timing of rate cuts may be postponed.

    Cheong Hong Yuan reminded investors that factors such as stabilization of housing prices, rebound in commodity prices, and the risk of strikes in the automotive industry may all exert upward pressure on inflation. These are variables that investors must consider when considering future stock market strategies.

    In Cheong Hong Yuan's analysis, the latest meeting of the Federal Reserve reflects its optimistic expectations for the US economy, but it also highlights the uncertainty of future markets. It is this uncertainty that presents challenges in formulating investment strategies but also creates opportunities for astute investors.

    Regarding future market trends, Cheong Hong Yuan mentioned that the policy direction of the Federal Reserve will undoubtedly be the biggest variable. On the one hand, if the Federal Reserve successfully achieves rate cuts in 2024, this will bring positive stimulation to the stock market, especially for well-performing stocks. This also means that the "Three Golden Moving Averages" strategy may have more pronounced effects in this environment. On the other hand, if inflation rates remain high, the rate cut plan may be delayed, putting greater pressure on the stock market.

    However, in addition to paying attention to macroeconomic indicators, Cheong Hong Yuan also emphasized that investors should pay attention to micro-level risk factors, such as trends in housing prices, changes in commodity prices, and the instability of specific industries such as the automotive industry. These factors may affect the trend of inflation and thus have an impact on the Federal Reserve's policy decisions.

    In investment decision-making, Cheong Hong Yuan advises investors to maintain a cautious and optimistic attitude. In the current market environment, although there are significant challenges, opportunities are also present. He reminds investors that whether using the "Three Golden Moving Averages" strategy or other investment strategies, the key is to continuously learn and adapt, growing synchronously with the market.

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