Home USA News Why did the Fed raise interest rates so quickly without a recession and why did US stocks soar? A picture to solve the puzzle

Why did the Fed raise interest rates so quickly without a recession and why did US stocks soar? A picture to solve the puzzle

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Why did the Fed raise interest rates so quickly without a recession and why did US stocks soar? A picture to solve the puzzle

A series of violent moves by the Federal Reserveraise interest rates, the US economy not only did not fall into recession, but continued to grow strongly. This is a phenomenon that has never been seen in previous interest rate hike cycles over the past 70 years, and has puzzled many economists. Now, a chart solves the mystery.

In just a year and a half, the Fed transferred federal fundsRate of interestThe target range has been increased from 0% to 5.25%~5.5%. It is surprising that such a rapid and substantial increase in interest rates has not yet caused a serious recession or crisis.

Raising interest rates significantly has actually triggered a so-called “rolling recession”, which impacts certain specific sectors of the US economy. For example, new home sales have fallen from 830,000 units (annual rate) before the Fed raised interest rates to 661,000 now. Households reached a low of 543,000 households during this period. Another example is manufacturing output, which has largely stagnated and recently shown signs of improvement.

But overall, the US economy appears to be in good shape, at least based on gross domestic product (GDP) growth. What exactly is the reason?

“Asset-light” companies have become a pillar of the stock market and economy

MarketWatch reports that this is because the US economy is no longer as sensitive to interest rates as it used to be.Moses Sternstein, lead author of the financial blog Random Walk, posted a chart originally produced by Bank of America (BofA). Did, which showed that the U.S. stockstamp 500Nearly half of the index is now made up of so-called “asset-light” stocks, including technology stocks and health care companies.

This chart divides S&P 500 stocks into four major categories: 1. “Cap-light/Innovation” (technology, telecom stocks and communications services excluding health care); 2. “Consumer-oriented” (essential/non-essential) essential consumption); 3. “Manufacturing/Asset Intensive/Capital Expenditure” (Industry, Raw Materials, Energy, Utilities and Telecommunications); 4. “Financial Stock/Real Estate Investment Trust (REIT)”.

As shown in the figure, the structural composition of the S&P 500 index has undergone major changes over the past 40 years. The proportion of “manufacturing/asset intensive/capital expenditure” component shares has fallen from 66% in 1980 to 1986. 49%, 44% in 1994, 26% in 2004, 29% in 2014, and falling to 18% in 2024; At the same time, the proportion of “capital-light/innovation” companies is increasing from 14% in 1980. Up to 49% in 2024.

This is not just true for the US stock market, but the economy as a whole is becoming less capital intensive.

Therefore, the actual impact of higher interest rates on technology companies is less than imagined, and the benefits may even outweigh the losses: rising interest rates force technology companies to improve efficiency.

Sternstein pointed out that as interest rates continue to rise, technology companies have begun to strive for efficiency and focus more on cash flow than sales growth. He wrote: “Investors may not like it, because although profits are good, growth is more attractive. But from the perspective of ‘the economic wheel is still turning’, the profit effect is good.”

As far as the stock market is concerned, he believes that this surge in US stocks is either an “evil dead cat rebound” or another bullish rally.

The S&P 500 ended February with a new record high, rising 5.2% for the month. In the past four months alone, the S&P 500 has jumped 21.5%.

A chart produced by Bank of America shows that the U.S. Nearly half of the S&P 500 index is now made up of “asset-light” companies, including technology stocks and health care companies. This chart breaks down S&P 500 components into four broad categories: capital-light/innovation, consumer-oriented, manufacturing/asset-intensive/capital spending, and financial/real estate investment trusts (REITs). (taken from the internet)

finance(tagstotranslate)interest rates