What is the impact of the Fed's interest rate hike on the stock market?
Raising interest rate means that the central bank of a country or region is raising interest, including deposit and loan interest, so as to increase the borrowing cost of commercial banks from the central bank or increase the savings interest.
However, unlike the Bank of China's interest rate hike, the Fed's interest rate hike does not refer to the deposit and loan interest rates of commercial banks, but refers to the federal funds rate, that is, the interest rate when commercial banks lend money to each other. This interest rate has a substantial impact on the interest rate of commercial banks, because the surplus and deficiency of reserves can have an impact on bank deposits and loans. Therefore, although the federal funds rate is not the deposit and loan interest rate, it will affect the deposit and loan interest rate.
The Fed's interest rate hike will increase the deposit interest of American depositors and increase everyone's willingness to save. It will appreciate against the US dollar, and investors are more willing to hold the US dollar. In the foreign exchange market, it will be reflected in the strength of the US dollar and the depreciation of other currencies against the US dollar.
From the market point of view, it has controlled the hot money lending that will lead to the financial bubble to some extent, avoided the economic bubble caused by inflation, and protected the status of the US dollar as the world's main reserve currency. For China, after the Fed raises interest rates, the US dollar will appreciate, while the RMB will depreciate relatively, which can better increase US imports to China, which will greatly promote China's export business and China's export business.
From the investment point of view, the stock market is not optimistic because of the decrease of funds in the market, but for American debt, the yield of American debt will increase. But raising interest rates also means that the economic situation is good, so raising interest rates will not make the stock market plummet. Moreover, China's A-share market will be relatively independent, and the impact will be relatively small. Judging from this meeting on interest rates, after the Federal Reserve announced a rate hike at this meeting, both US stocks and Chinese stocks started a deep V rebound from the previous sharp decline, and domestic and foreign stock markets were all red.