The side effects of violent interest rate hikes are fermenting. The legal person suggests that investment allocation should give priority to large leading company stocks and high-quality bonds.

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[Reporter Wu Xintian/Taipei Report] In 2022, the US Federal Reserve will violently raise interest rates in response to high inflation. The deferred effect is fermenting. The market cannot be overly optimistic about economic recovery. Legal persons suggest that investment allocation should be based on large leading company stocks and high-quality stocks. Bonds are a priority.

Cathay United Bank released its investment research report for the second quarter of 2023 today. From the perspective of the general economic environment, Cathay United Bank analyzed that although the resilience of the job market has brought support to the US economy, the impact of high interest rates continues to ferment. economic activity sows hidden dangers.

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In order to combat the 40-year high inflation rate, the Federal Reserve has adopted a monetary policy of violently raising interest rates in the past year, and its deferred effect is gradually fermenting, including the inversion of the US Treasury bond spread and cooling consumption, etc., all of which predict the second quarter funds The tightening environment remains unchanged, which will put operating pressure on small and medium-sized enterprises and banks. Investors still need to pay attention to financial emergencies.

In terms of data, although the U.S. inflation rate has dropped from a high of 9% to about 6% at present, it is still unbearable for ordinary people. It is estimated that the Federal Reserve will still be under pressure to raise interest rates by 1 yard in May. Unless the financial market continues to be turbulent, it may hold off on raising interest rates.

On the whole, the Federal Reserve will continue to make trade-offs between financial stability and inflation, and volatility in the financial market may be inevitable.

How to obtain stable income is the primary issue for investors.

Cathay Pacific recommends that investors, as the pace of interest rate hikes by the Federal Reserve is coming to an end, it is advisable to seize the eve of the possible loosening of monetary policy, increase the duration of bonds, lock in high yields, earn stable interest, and have opportunities to earn in the future Purchase price difference.

In terms of the stock market, compared to 2022, Cathay United believes that investment opportunities have gradually dawned.

There are two main reasons. First, China’s anti-epidemic policy has shifted significantly. Driven by the stimulation of domestic demand and the government’s infrastructure construction, it is conducive to the gradual warming of the manufacturing industry. Second, after two years of adjustments, the high inventory situation of the manufacturing industry has improved a lot. In the second half of 2023, corporate profits are expected to return to positive growth, which provides an opportunity for the stock market to pull back and build.

However, Cathay United Bank also reminded that under the tightening environment, the pressure of capital ebb still remains, and it will be difficult for the stock market to stage a V-turn.

In addition, with the rise of AI, it is estimated that it will drive the growth of demand in application industries such as chips and semiconductors, which will also give technology stocks more room for imagination in the future.

Looking at the investment thinking in the second quarter of 2023, the pressure of the ebb tide of funds is still there, which keeps the stock market in a volatile and consolidating pattern; in the bond market, inflationary pressures are declining, the pace of interest rate hikes by the Federal Reserve is slowing down, coupled with market volatility. The advantage of being able to attack and retreat can be defensive; in terms of exchange rate, the time for the Fed to raise interest rates has passed, and the interest rate differential advantage is blunted, and the future of the US dollar is viewed as weak.

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