The Fed's interest rate hike is also bad for the stock market, which will cause certain fluctuations in the RMB exchange rate and increase China's export expectations.
As inflation in the United States continues to be high and expectations for the Fed to raise interest rates continue to heat up, Bank of America has released the most radical Fed policy forecast this year. Economists predict that there will be seven interest rate hikes of 0.25 percentage point each time in 2022, and there will be four more next year.
The signal of the Federal Reserve to raise interest rates sharply and shrink its balance sheet quickly disturbed the stock market, and the S&P 500 index fell more than 6% this year.
Earlier, some analysts pointed out that taking history as a mirror, the US stock market has been performing well during the Fed's interest rate hike, because economic recovery often supports corporate profit growth and stock market rise.
However, in the latest report, Bank of America pointed out that these optimistic analyses overlooked an important detail. Strategists, led by Savita Subramanian, wrote that although US stocks have achieved positive returns in previous interest rate hike cycles, the key risk this time is that the Fed "tightens monetary policy, which coincides with an overvalued market".
"Before the first interest rate hike this round, the valuation of the S&P 500 index was higher than any interest rate hike cycle except 1999-2000." They added.
Therefore, Bank of America is completely in the bear market camp this time, and it is predicted that the S&P 500 index will reach 4,600 by the end of this year, which means that it is only 2% higher than the current level. The bank's strategists believe that the historical precedent closest to the current prospect is the monetary tightening cycle at the turn of the century, when the stock market "ended dismally" with the bursting of the technology stock bubble.