This much in advance: The US dollar remains the big winner. U.S. government bonds are yielding attractive returns, and investors are borrowing large amounts of greenbacks to buy U.S. bonds. Only when the other central banks in the world also drastically turn the interest rate screw, other weakening currencies are likely to catch up again. Here’s EURUSD in a weekly chart.<\/p>\n
![\"\"](\"https:\/\/bernstein-bank.azureedge.net\/wp-content\/uploads\/2022\/09\/fedde.png\")
Quelle: Bernstein Bank GmbH<\/p><\/div>\n
So to the facts: The Fed has raised the key interest rate for the third time in a row by 0.75 percentage points. The interest rates for overnight loans from banks are now in the corridor of 3 and 3.25 percent.<\/p>\n
Higher for longer<\/strong>
\nThere’s probably more to come: Fed Chairman Jerome Powell stressed that the central bank will continue to tighten monetary policy until there is convincing evidence that inflation is easing. Reducing inflation, he said, requires a longer period in which economic growth is below the growth trend and potential of the economy. In addition, he said, the labor market must cool. Powell again announced pain for the economy and consumers. Thus, he held out the prospect of further interest rate steps.
\nThe belief in a turnaround – English: pivot – has now disappeared from the market almost everywhere. The expectation for the upper end of the interest rate corridor is 4.4 percent by the end of 2022. And that brings us to the likely consequences for some assets.<\/p>\nEquities more likely to be short<\/strong>
\nThe matter is bearish for high-tech stocks in particular. First, because borrowing from young companies is becoming more expensive. Second, because interest rates play a role in the most important model for valuing stocks, discounted cash flow. Higher interest rates equal lower valuation.
\nBut cyclicals and defensive stocks are also likely to be hit by the general risk aversion. High inflation is already making consumers cautious – especially if they are afraid of losing their jobs in a recession. Goldman Sachs, for example, just suggested that the Fed could beat the S&P 500 down to 2,900 points.<\/p>\nUnclear situation for gold<\/strong>
\nThe situation with gold is trickier. The price has been trending south despite rising inflation in anticipation of interest rate hikes. In addition, new competition from cryptocurrencies stopped the buying mood. When interest rates rise, that’s usually a stopper for precious metals as well – because if someone gets an attractive coupon on bonds, that’s an argument against gold. Especially since there are still bank fees to pay for the safe deposit box or costs to have your own safe at home.
\nBut many experts fear a recession due to the increased interest rates. And tangible assets not only protect against a decline in purchasing power. But also against deflation – in other words, the total collapse of the economy. When banks collapse and cash is no longer accepted, gold and silver coins are the saving alternative for many.
\nWe hope that we have been able to shed some light on the fog of the market for you with this brief analysis. We stay on the ball for you – Bernstein Bank wishes successful trades and investments!<\/p>\nThe content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. <\/small>CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7<\/small><\/p>\n","protected":false},"excerpt":{"rendered":"
22.09.2022 \u2013 The market is sorting itself out after the Federal Reserve’s interest rate decision. It is clear that the Fed will continue to tighten. We take a look at…<\/p>\n","protected":false},"author":41,"featured_media":24660,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[6],"tags":[],"class_list":["post-24671","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"\n
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<\/p>\n