The dot plot is expected to raise rates twice within the year, but I don’t think that’s a negative 🧐
The Fed has delivered a 25bp rate hike, bringing the interest-rate range up to 3.75%–4.00%. Based on the dot plot and institutional expectations, there’s likely to be one more hike later this year.
Yesterday’s market action: in fact, the S&P intraday chart jumped up right at the moment the hike was announced. The subsequent decline was mainly because Powell’s remarks refused to provide clear guidance.
The market hates uncertainty, but that also fits his usual style. He doesn’t want the market trading every day while staring at the Fed.
Not like many bearish bloggers, I’ve never felt that this rate hike is a negative. I’ve stressed the logic again and again.
First, the market has already fully priced in two hikes within the year.
Second—and this is the most important point—right now the real core contradiction in the market is that Treasury yields are too high.
And the 10-year real yield, DFII10, is the key anchor for discounting growth-stock valuations.
Put simply, real yield is the real return you require for holding dollar-denominated assets after deducting expected inflation.
For high-growth companies like semiconductors and AI, value is mostly in the cash flows of many years ahead.
The higher the real yield, the less valuable the future money is when discounted to today—so valuations get squeezed hard, and the corresponding stock prices fall.
That means: the lower the real yield on the 10-year U.S. Treasury, the better.
So Powell can only choose to hike and stay hawkish; his interests align with those of Bessent.
The Fed has to reassure the bond market and demonstrate its determination to fight inflation, so it can push down yields further out.
As long as the economy doesn’t break and a soft landing can be achieved, pushing back the far-dated yields with hawkish guidance may actually relieve valuation pressure for tech stocks.
Next, whether the 10-year real Treasury yield can peak and then fall is the real barometer.
Intel and Hynix are partnering to build a factory in the U.S., and their performance is relatively strong.
SpaceX has received a breakthrough order and has already started building it, with a cost of 150.91 (closely watch rumors about a merger with Tesla).
KLAC’s cost is 171.87; it’s currently moving quite weakly. Keep an eye on the support level.
VRT’s cost is 240.47, and it’s also at an important support level.
$INTC $SPCX $VRT
The Fed has delivered a 25bp rate hike, bringing the interest-rate range up to 3.75%–4.00%. Based on the dot plot and institutional expectations, there’s likely to be one more hike later this year.
Yesterday’s market action: in fact, the S&P intraday chart jumped up right at the moment the hike was announced. The subsequent decline was mainly because Powell’s remarks refused to provide clear guidance.
The market hates uncertainty, but that also fits his usual style. He doesn’t want the market trading every day while staring at the Fed.
Not like many bearish bloggers, I’ve never felt that this rate hike is a negative. I’ve stressed the logic again and again.
First, the market has already fully priced in two hikes within the year.
Second—and this is the most important point—right now the real core contradiction in the market is that Treasury yields are too high.
And the 10-year real yield, DFII10, is the key anchor for discounting growth-stock valuations.
Put simply, real yield is the real return you require for holding dollar-denominated assets after deducting expected inflation.
For high-growth companies like semiconductors and AI, value is mostly in the cash flows of many years ahead.
The higher the real yield, the less valuable the future money is when discounted to today—so valuations get squeezed hard, and the corresponding stock prices fall.
That means: the lower the real yield on the 10-year U.S. Treasury, the better.
So Powell can only choose to hike and stay hawkish; his interests align with those of Bessent.
The Fed has to reassure the bond market and demonstrate its determination to fight inflation, so it can push down yields further out.
As long as the economy doesn’t break and a soft landing can be achieved, pushing back the far-dated yields with hawkish guidance may actually relieve valuation pressure for tech stocks.
Next, whether the 10-year real Treasury yield can peak and then fall is the real barometer.
Intel and Hynix are partnering to build a factory in the U.S., and their performance is relatively strong.
SpaceX has received a breakthrough order and has already started building it, with a cost of 150.91 (closely watch rumors about a merger with Tesla).
KLAC’s cost is 171.87; it’s currently moving quite weakly. Keep an eye on the support level.
VRT’s cost is 240.47, and it’s also at an important support level.
$INTC $SPCX $VRT