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On Investors’ Minds - APAC Edition
19. Could the Fed really stick with ”higher for longer”?
Oct 12, 2023
This podcast discusses the impact of a hawkish US Federal Reserve on Asian markets, the strength of the US economy, and concerns about inflation due to oil supply cutbacks and geopolitical conflicts.
06:30
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Quick takeaways
- The hawkish stance of the US Federal Reserve has caused a spike in bond yields and negative reactions in equities and risk assets, posing potential risks to the US economy.
- China's housing market plays a crucial role in the broader economy, and positive sentiment on real estate prices is crucial for sustained improvement. Additionally, sectors like automobile, renewable energy, and advanced manufacturing offer overlooked investment opportunities.
Deep dives
Impact of a Hawkish Federal Reserve on Bond Yields and Risk Assets
The focus on the Horkish Federal Reserve has led to a spike in bond yields and a negative reaction in equities and risk assets. The ongoing strength of the US economy, along with the higher-for-longer stance by the Fed, has contributed to the rise in bond yields. Inflation concerns, driven by the cutback in oil supply and geopolitical conflicts, have added further pressure. However, there is a risk of another policy error if the Fed commits to higher rates for an extended period, especially considering the potential impact on the US economy, including mortgage rates and small banks' balance sheets.
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Discover
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Listen to the best highlights from the podcasts you love and dive into the full episode