A research note from CITIC Securities said US stock valuations are likely to remain under pressure in the near term after markets missed the timing of the latest rate-hike window, regardless of whether the Federal Reserve raises rates in September. Over a longer horizon, the note said the completion of a hike could ease valuation pressure, while a supportive stance on artificial intelligence from the "Productivity and Employment Task Force" could help keep the US AI investment narrative in place.
The note also pointed to the Federal Open Market Committee’s July 29 decision to leave rates unchanged for a fifth straight meeting. Three voting members backed a 25-basis-point increase, making internal divisions at the Fed more visible. In the market, that translated into what the note described as a split response: dovish pricing at the short end and hawkish pricing at the long end. CITIC Securities added that rising inflation expectations weighed on the US dollar and created a window for Japan’s Ministry of Finance to intervene in foreign exchange markets. It also said strong growth in CSP cloud businesses helped ease concerns, at least to some extent, over whether AI-related triple capital expenditure can be sustained.
Odaily reported that a research note from CITIC Securities said US stock valuations are facing pressure in the short term after markets missed the timing of the current rate-hike cycle, regardless of whether the Federal Reserve raises rates in September.
The note said that, over the medium to long term, the completion of a rate hike could ease valuation pressure. It added that a positive stance on AI from the "Productivity and Employment Task Force" could help the US equity AI narrative continue over the long run.
Fed divisions became more visible after latest FOMC decision
According to the note, the Federal Open Market Committee left rates unchanged on July 29 for a fifth consecutive meeting. Three voting members supported a 25 bps rate increase, bringing internal disagreement at the Fed into the open.
The market then showed what the report described as a split reaction, with dovish signals at the short end and hawkish signals at the long end. Rising inflation expectations also weighed on the US dollar and created a window for Japan’s Ministry of Finance to intervene in the foreign exchange market. At the same time, strong growth in CSP cloud business helped ease some concerns over the sustainability of AI-related triple capital expenditure.
Late August and September are the next points to watch
CITIC Securities said interest-rate-sensitive sectors, high-valuation low-growth segments, and small-cap stocks are under pressure in the near term. The next window for a shift in liquidity expectations may come at the Jackson Hole symposium in late August or at the Fed’s September rate meeting.
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