The Fed sets a hawkish rhythm, and the rate hike will continue

On the evening of 8/26, after Fed Chairman Powell delivered a relatively hawkish opinion speech ( Federal Reserve Chairman Powell discussed monetary policy in Jackson Hole (verbatim) | FinGuider US Stock Information Network ), on Friday evening U.S. stocks fell thousands of points, and Taiwan stocks also fell on 8/29. Should we be pessimistic?

In fact, according to the verbatim script, we can sort out several key points

1. The Fed's most important task is to maintain long-term inflation at around 2, so it needs to use some powerful tools

2. In the future (not now) the labor market and household businesses may suffer some shocks

3. The fundamentals are still very strong, especially the job market is awesome

4. July inflation was lower than expected, but missed Fed target

5. Public expectations will affect inflation, so we need to reduce inflation quickly before public perception changes

6. The first point is important

From the above arrangement, we can know that although the chairman repeatedly emphasized the reduction of inflation and the harm caused by high inflation on the surface, we can still speculate that because of the strong economic fundamentals, the Federal Reserve is only choosing between the two evils. Rather than waiting for a long period of high inflation to repeat the quagmire of stagnant inflation, the pain at that time can be greater than that of raising interest rates now, and compared with the job market, perhaps the capital market will be hit harder, but In the absence of black swans and gray rhinos, most things are controllable and preventable, so the downside will be relatively limited, and the key point to observe in this round of interest rate hikes is that stopping interest rate hikes will be when inflation falls. At that time, if a healthy deleveraging has been achieved, the next round of interest rate cuts will bring a considerable reservoir to the capital market.

In addition, from a macroscopic point of view, it is still scientific and technological progress and productivity innovation that make human progress more convenient. Countless great inventions such as flush toilets, running water, automobiles, locomotives, airplanes, etc., are the modern civilians who can live better than ancient times. The reason why aristocrats are more convenient (convenience does not mean happiness), so in addition to paying attention to the ebb and flow of FED, it is necessary to pay special attention to what new things can really bring about the whole society under the "narrative" of many capital VCs Progress rather than a new round of ponzi.

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