Hawk sounded, stocks and bonds rose! The Fed's New Year debut helpless "to the bull"?

By    6 Jan,2023

From the first voice of the Federal Reserve officials in the New Year, to the release of the minutes of the Federal Reserve's December meeting, yesterday the global markets undoubtedly ushered in the first trading day of the year dominated by the Federal Reserve fundamental big events.


However, this Fed "yell" - desperately release hawkish signals in the day, the financial markets seem to reflect some "loud thunder but little rain". Although the plate experienced some twists and turns, but the U.S. stock and bond markets rose on Wednesday, almost ignoring all the hawkish information released by the Federal Reserve ......

By Wednesday's close, the three major U.S. stock indexes were all higher, ending the previous two consecutive trading days of declines. Among them, the S&P 500 index rose 28.83 points, or 0.8%, to 3852.97 points; the Dow Jones Industrial Average rose 133.40 points, or 0.4%, to 33269.77 points. The Nasdaq Composite Index climbed 71.78 points, or 0.7 percent, to 10,458.76 points.

U.S. bond prices, on the other hand, continued their strong performance on the first day of the New Year, with yields generally falling across maturities: the 2-year U.S. bond yield fell 0.8 basis points to 4.37%, the 5-year U.S. bond yield fell 5.2 basis points to 3.85%, the 10-year U.S. bond yield fell 5.7 basis points to 3.695%, and the 30-year U.S. bond yield fell 4.2 basis points to 3.807%.

There is no doubt that any investors who are currently buying in the stock and bond markets based on bets that the Fed may eventually ease monetary policy during the year are trying to directly "go against the Fed", a trend that is becoming more and more apparent after last night's hawkish Fed minutes. And the Fed's tough hawkish stance and investors dovish bets between the struggle, which side will finally have no choice but to bow down and compromise, it is clear that the next few months on the financial markets will become one of the most central game point ......

Federal Reserve December minutes review: four core highlights release hawkish signals

The minutes of the Fed's December meeting released on Wednesday did not directly state that Fed officials would again choose to raise interest rates by 50 basis points at the next meeting, or would they further slow the pace of rate hikes to 25 basis points. However, the overall stance of the minutes is clearly "hawkish" - the minutes show that officials expect to maintain high interest rates for "some time" and are concerned about the market's misinterpretation of the Fed's policy concerns.

Here are the four core highlights of last night's Fed minutes.

①No officials believe that 2023 is the right time to cut interest rates

The 50 basis point rate hike at the Fed's December meeting ended the Fed's previous trend of four consecutive 75 basis point rate hikes, while also bringing the target range for the benchmark federal funds rate to 4.25%-4.5%. For this year's interest rate path, the market's current biggest suspense is undoubtedly the Fed will raise rates several times, as well as whether the Fed is likely to cut rates this year.