Last week (6/5-6/9),ethereum price prediction 2024 the US stock market was mostly flat, with the S&P 500 rising 0.4%, the Dow Jones Industrial Average rising 0.3%, and the Nasdaq 100 falling 0.1%. The Japanese stock market hit a new high, with the Nikkei 225 index rising 2.4%.
【Source: MacroMicro Date2023/6/5-2023/6/9】
【Source: MacroMicro Date2023/1/1-2023/6/9】
This Wednesday, the Federal Reserve will announce the June interest rate decision, as well as release the summary report of the latest economic forecast for the quarter and the dot plot chart.
Several Federal Reserve officials publicly support "skipping" the June rate hike, and the market has priced in that the Federal Reserve will pause rate hikes at the June meeting.
【Source：CME FedWatch】
However, the future path of interest rate hikes is still subject to debate. Some investors believe that the "skip" in June will be a prelude to ending rate hikes, while the latest survey by the Financial Times indicates that there will be at least two more 25 basis point rate hikes this year.
Goldman Sachs expects that the Fed is highly likely to raise rates by 25 basis points in July and increase its terminal rate forecast to 5.25%-5.5%. Afterwards, it will cut rates by 87.5 basis points to around 4.5% in 2024 and then by 112.5 basis points to 3.375% in 2025, with the mean of long-term or neutral interest rates expected to rise slightly.
Mitrade Analyst：
From the perspective of maintaining credibility, it is highly probable that the Federal Reserve will cease raising interest rates in June. However, the expectation is that the end of US interest rate hikes is premature. We believe that in the future, the Federal Reserve will follow in the footsteps of the Bank of Canada and adopt a stop-and-go approach. Last week, the Bank of Canada unexpectedly raised interest rates by 25 basis points, resuming interest rate hikes after pausing them twice.
Recently, the US stock market has been soaring, with the S&P 500 index rising for four consecutive weeks and the NASDAQ index hitting its longest streak in three years. There are mixed views on whether the rebound will continue.
Goldman Sachs raised its forecast for the S&P 500 index from 4,000 to 4,500 points for 2023. It gave two reasons for the continued rise of the US stock market: first, AI supports the growth of corporate profits, and second, the probability of a future recession in the US is small, which will drive the US stock market higher.
Assuming a "soft landing," Goldman Sachs predicts that earnings per share of the S&P 500 index will increase by 1% to reach $224 in 2023, far above the consensus forecast of $206.
Bank of America maintains a bearish outlook, citing two main factors: first, the Federal Reserve has not yet finished raising interest rates, and rates are expected to continue to rise. The other factor is "depletion of liquidity."
With global central bank quantitative tightening (QT) and replenishment of the US Treasury General Account (TGA), global liquidity is expected to decrease by over $1 trillion in the next 3-4 months, potentially approaching $1.5 trillion.
Mitrade Analyst：
We maintain our view that the future trend of US stocks will see a short-term rebound and a medium-to-long-term volatile decline. The benefits brought by AI are not enough to offset the negative impact of the recession. Furthermore, liquidity risk is increasing, and although US stock fund flows have slightly rebounded in recent weeks, the majority of new funds have flowed into the money market (cash).
Last week, the Nikkei 225 index broke through the 32,000 mark, reaching a new high not seen in 33 years. Although it briefly declined due to rumors about the Japanese government issuing ETFs to young people, the market rebounded after the Bank of Japan rejected the proposal.
【Source：TradingView】
Why has the Japanese stock market been rising? Mainly due to a valuation recovery and expectations for exchange rate profits.
The key factor that previously suppressed Japanese stock valuations was deflationary pressures. However, now that Japan has escaped deflation and entered an inflationary period, Japanese stocks are being re-evaluated. Currently, the PB of Japanese stocks has risen from 1.47 in 2022 to 1.88 now, while the PE has increased from 15 in 2022 to 20.
Even so, compared to the S&P 500's above-PE24 and above-PB4, Japanese stocks still seem relatively "undervalued." Especially with inflation appearing to be sustainable, the valuation multiples of Japanese stocks are expected to rise even further.
In addition, with inflation continuing to rise, the Bank of Japan no longer has room or incentive to ease policy further, and the yen is expected to appreciate against the US dollar in the medium to long term. This will increase attractiveness to foreign capital inflows into the stock market.
Mitrade Analyst：
The expectation of increased valuation, profitable exchange rates, and hedging factors have greatly increased the attractiveness of the Japanese stock market to foreign capital. Data shows that overseas funds net bought over 1.86 trillion yen of Japanese stocks in May. Currently, Japan's stock market is still on an upward trend, and investors can participate appropriately.
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