01

Today in the early morning, the Federal Reserve announced its latest interest rate decision, raising rates by another 75 basis points!

This marks the fifth interest rate hike by the Federal Reserve since March of this year, and the last three hikes have all been substantial increases of 75 basis points each. Since entering the rate-hiking cycle, the Federal Reserve has cumulatively raised rates by 300 basis points across five increases.

Looking back at the history of interest rate hikes, such a large-scale, dense series of rate hikes over such a short period of time is unprecedented since 1981.

The federal funds rate has now reached 3%, but to curb inflation, the Federal Reserve is expected to continue raising rates in the future, potentially exceeding 4%. As a result, the U.S. economy is likely to enter a period of low growth or even negative growth in the coming period. Unemployment rates are expected to rise.

02

After the U.S. stock market opened last night, until the announcement of the rate hike, the Dow Jones Industrial Average had been hovering at an increase of 0.5% with minimal fluctuations.

Advertisement

However, after the Federal Reserve announced the rate hike decision at 2 a.m. today, the Dow Jones Index experienced a rapid plunge, followed by a brief rebound, but then continued to decline in the last hour before the market closed, ending at the day's lowest point.

In the end, the Dow Jones Industrial Average and the S&P 500 both fell by 1.7%, with the Dow Jones dropping 522 points, and the Nasdaq Composite Index fell by 1.8%. The percentage decline of the three major indices was quite consistent.All industry sectors of the US stock market experienced a synchronized decline yesterday, with the consumer discretionary sector falling by 2.4%, recording the largest drop, while telecommunications, materials, and financial sectors also saw declines reaching 3%.

The stock prices of major tech giants generally fell, with Amazon's stock price dropping by 3%, and Apple, Tesla, and Netflix all experiencing declines exceeding 2%.

The NASDAQ Golden Dragon Index, which represents the trend of Chinese concept stocks, saw a significant decline, falling by 5.9% last night and closing below 6,500 points.

Pinduoduo, Baidu, JD.com, and NetEase all saw declines exceeding 5%, while Alibaba fell by 4%.

New energy vehicles also experienced a substantial decline, with XPeng dropping by 11.5%, NIO by 10.3%, and Li Auto by 8.8%.

An increasing number of market analysts and economists believe that the US stock market will continue to decline. In response, several large international investment banks have also predicted that the stock market will fall by 20% to 40% on its current basis.

Do not assume that after the interest rate hike in September, the US will stop raising interest rates.

Currently, Wall Street has already begun discussing the interest rate meeting in November, with the Federal Reserve holding its next meeting on November 2-3. Prior to this, several important economic data will be released, including inflation and employment data.

However, considering that the current inflation rate remains high at 8.3%, even if it gradually falls over the next one or two months, it is still far from reaching the Federal Reserve's 2% inflation target.Therefore, in the upcoming meetings, the Federal Reserve will likely continue to raise interest rates further, and it is even possible that by mid-2023, the Fed will increase the interest rate to 4.5%.

Bridgewater Associates believes that the U.S. stock market will fall by another 20%. Goldman Sachs predicts that the S&P 500 index will return to 2900 points.

The most pessimistic is Nouriel Roubini, who believes that the S&P 500 still has a 40% decline potential.